An Evaluation of the Strategic Impact of the UAE-India LNG Agreement

By Nathan Abbington

India’s energy hunger is insatiable. As the world’s third-largest energy consumer barrels toward a $5 trillion economy, its demand for cleaner, reliable fuel is surging. Enter the United Arab Emirates (UAE), a hydrocarbon heavyweight pivoting to meet that need. On February 13, 2025, ADNOC Gas, a subsidiary of Abu Dhabi’s state oil giant ADNOC, inked a 14-year, $7-9 billion deal to supply Indian Oil Corporation (IOC) with up to 1.2 million tonnes per annum (mtpa) of LNG starting in 2026. Hailed as a milestone in UAE-India energy ties, this pact—announced at India Energy Week—promises to bolster India’s gas ambitions while cementing the UAE’s role as a key supplier. But beneath the fanfare lie complex stakes: energy security, economic trade-offs, and a global market in flux. This deal is a bold step, but it’s not without risks.

A Partnership Rooted in Necessity

The UAE and India have been energy bedfellows for years. In 2022, the UAE exported $2.85 billion worth of LNG to India, making it the country’s second-largest supplier after Qatar. This latest deal builds on that foundation, joining a string of agreements—two others in 2024 with GAIL (0.52 mtpa) and IOC (1 mtpa)—that signal a deepening bond. For India, it’s about more than just gas; it’s about survival. The government aims to raise natural gas’s share in its energy mix from 6% to 15% by 2030, a linchpin in its quest to cut emissions and power industrial growth. With domestic production lagging—India imported $17.5 billion in LNG in 2022—this deal is a lifeline.
For the UAE, it’s a strategic play. ADNOC is doubling down on LNG, eyeing a capacity jump from 6 mtpa to 15.6 mtpa by 2028 via its Ruwais project. India, with its 25% share of global energy demand growth over the next two decades (per the International Energy Agency), is a prize market. The deal’s timing is no accident—competition is heating up. Qatar, the world’s LNG titan, locked in a 20-year, 7.5 mtpa pact with India’s Petronet LNG in 2024, while the U.S., buoyed by Trump-era energy policies, is flexing its export muscle. The UAE’s move secures a foothold in Asia’s rising star, reinforcing its pivot from oil to gas as a “transition fuel” in a decarbonizing world.

The Upside: Energy Security and Beyond

At its core, this deal is a win for India’s energy security. IOC, the nation’s top refiner, will source LNG from ADNOC’s Das Island facility—a veteran plant with over 3,500 cargoes shipped since the 1970s—ensuring a steady flow starting in 2026. That’s critical for a country where industrial hubs like Gujarat and Maharashtra guzzle gas for fertilizers, power, and manufacturing. Long-term contracts like this shield India from the wild price swings that rocked global LNG markets in 2022 after Russia’s invasion of Ukraine. Back then, spot prices hit $70 per million British thermal units (mmBtu); today, they hover around $10-12. A 14-year fixed supply offers predictability, letting India plan without the specter of another energy shock.
The economic perks are tangible too. Lower logistics costs—thanks to the UAE’s proximity versus U.S. or Australian suppliers—trim the bill. India’s 2022 trade treaty with the UAE, waiving a 2.5% import tax, sweetens the math further. For businesses, cheaper gas could juice competitiveness, especially in export-driven sectors like chemicals and textiles. Add in the Comprehensive Economic Partnership Agreement (CEPA) from 2022, and you’ve got a framework that’s already boosted bilateral trade to $85 billion. This deal isn’t just about fuel—it’s a cog in a broader economic machine.
Then there’s the green angle. LNG burns cleaner than coal, which still dominates India’s power grid. ADNOC touts its Ruwais LNG as “lower-carbon,” powered partly by clean energy, aligning with India’s climate pledges under the Paris Accord. If the DFCs (Dedicated Freight Corridors) can haul this gas efficiently to inland hubs, it might even dent road transport’s diesel reliance. For the UAE, it’s a chance to brand itself as a sustainable energy partner, not just an oil emirate—a narrative that resonates as COP30 looms in 2025.

The Catch: Risks and Trade-offs

But let’s not pop the champagne yet. This deal has wrinkles. For one, India’s locking into a 14-year commitment when the global energy landscape is anything but static. By 2040, renewables could dominate, per the IEA, as solar and wind costs plummet. Japan’s LNG imports, for instance, dropped from 83 million tonnes in 2018 to 66 million in 2023 as nuclear restarts and green tech kicked in. If India overshoots on gas, it risks stranded assets—terminals and pipelines gathering dust as cheaper alternatives emerge. The 1.2 mtpa from this deal, plus commitments from Qatar and others, could oversaturate a market that’s still building demand.
Price is another wild card. While long-term deals buffer against spot market chaos, they’re not immune to geopolitics. The UAE’s LNG pricing isn’t public, but benchmarks like Brent crude (tied to many contracts) can spike—2022 taught us that. If oil climbs again, India’s “affordable” gas could sting. And while the UAE’s closer than, say, Texas, shipping costs still hinge on stable Middle East sea lanes. A flare-up in the Gulf—like the 2019 drone attacks on Saudi facilities—could snarl supply chains, leaving India scrambling.
The UAE faces its own gambles. Pouring $13 billion into Ruwais hinges on locking in buyers, but India’s not the only game in town. Japan and South Korea, once LNG gluttons, are balking at rigid terms (like Qatar’s destination clauses), favoring flexible U.S. and Omani deals. If India pivots too—or if demand fizzles—ADNOC could be left with excess capacity. Ruwais’s 9.6 mtpa expansion is bold, but over 7 mtpa is already booked, leaving little wiggle room if markets shift.

The Bigger Picture: Geopolitics and Competition

This deal doesn’t exist in a vacuum—it’s a chess move in a crowded energy board. The U.S., under a revived Trump push, is flooding Asia with LNG, offering shorter, looser contracts that Qatar’s rigidity can’t match. A February 21, 2025, OilPrice.com analysis tied this UAE-India pact to Washington’s sanctions on Russia, suggesting America’s nudging allies like India toward friendly suppliers to counter China’s rise. The UAE, a U.S. partner via the Abraham Accords, fits that script, especially with its $13 billion gas investment signaling deeper Western ties.
Yet, India’s not picking sides—it’s hedging. Qatar’s 7.5 mtpa deal dwarfs this one, and TotalEnergies’ 0.8 mtpa pact from 2023 keeps France in the mix. India’s playing all angles, securing gas from multiple corners to avoid over-reliance. That’s smart, given LNG’s politicization post-Ukraine. The UAE, meanwhile, is threading a needle—balancing India’s needs with its own ambitions to rival Qatar and the U.S. in a market where flexibility, not just volume, increasingly rules.

What’s Next: Making It Work

For India, success hinges on execution. The DFCs must sync with LNG terminals—Jamnagar or Dahej—to move gas inland fast. Policy tweaks, like subsidies for gas-based power, could stoke demand, ensuring this 1.2 mtpa doesn’t sit idle. The UAE needs to deliver—literally. Ruwais must hit its 2028 target, and ADNOC must keep pricing competitive against U.S. shale gas or Qatar’s mega-expansion (126 mtpa by 2027). Both sides should eye co-investment—India’s cash in Ruwais could deepen the partnership, echoing Japan’s stakes in Australian LNG.

A Step, Not a Leap

The UAE-India LNG deal is a lifeline with strings attached. It bolsters India’s energy security at a critical juncture, ensuring a steady supply of natural gas while supporting the country’s gradual pivot to renewable energy. Beyond energy needs, it tightens the economic bond between the two nations, strengthening trade ties in a volatile global landscape. For the UAE, the agreement is more than just a sale—it’s a strategic move to secure a foothold in one of the world’s fastest-growing energy markets while showcasing its dominance in the LNG arena. This partnership undoubtedly underscores mutual benefits and exposes both sides to shifting market dynamics and the unpredictability of future energy demands.
Yet, this deal is no silver bullet. India’s ambitious renewable energy targets loom large, signaling a future where fossil fuels could play a diminishing role. At the same time, global competition for LNG markets is fierce, and the balance of power could shift quickly. Valued at $7-9 billion, this agreement serves as a strategic bridge to 2040 rather than a final destination. If both countries stay agile and adapt to the changing energy landscape, it’s a win-win—otherwise, it’s a costly gamble in a world moving beyond gas.  

About the Author

Nathan Abbington is a UK-based financial-cum-energy analyst with extensive experience in the global financial markets. He specializes in analyzing financial markers, oil and gas trends, renewable energy developments, and the impact of geopolitical events on energy prices.

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