Gujarat Gas invokes force majeure, restricting industrial gas supply due to Middle East conflict
Gujarat Gas has invoked force majeure, restricting industrial gas supply effective March 6 due to the ongoing Middle East conflict disrupting R-LNG availability. This has led to significant disruptions in Gujarat's industrial clusters, particularly affecting the ceramic, chemical, and textile sectors, with some units already shutting down. Other gas suppliers and users like Adani Total Gas are also implementing supply curbs and price adjustments for industrial consumers.
Key Highlights
- Gujarat Gas invoked force majeure on March 4, restricting industrial gas supply from March 6.
- Middle East conflict disrupts R-LNG availability, impacting Gujarat's industrial sectors.
- Ceramic industry in Morbi faces shutdowns; some chemical and textile units also affected.
- Adani Total Gas implements supply curbs for industrial users but keeps CNG/PNG prices stable.
- Global LNG supply chain disruptions impact India, with Qatar being a key supplier.
Gujarat Gas has officially invoked the force majeure clause on its gas supply agreements with industrial customers, leading to a restriction on their daily contracted quantities effective March 6, 2026. This significant decision stems from severe constraints in the availability of regasified liquefied natural gas (R-LNG) due to the ongoing war in the Middle East region, which has disrupted global energy routes. The company's regulatory filing on March 4, 2026, indicated that 'acts of war' are not covered under their insurance policies, thus necessitating the invocation of force majeure. The overall impact of this ongoing event remains difficult to estimate at this stage, with Gujarat Gas actively monitoring the developments.
The repercussions of these supply disruptions are already being felt across various industrial clusters in Gujarat. The ceramic industry in Morbi, a major hub for tile production in India, is particularly hard-hit. Nearly 100 ceramic manufacturing units in Morbi have reportedly shut down due to disruptions in propane gas supplies, with industry representatives warning that hundreds more could follow suit if the situation does not improve. Some units have stock for only a few days, and natural gas supplies from Gujarat Gas are estimated to last about a week or slightly more for some. The crisis is exacerbated by the fact that 70-80% of Morbi's ceramic manufacturers rely on propane for their operations.
Beyond the ceramic sector, chemical, textile, and other energy-intensive manufacturing units in Gujarat are also facing challenges. In Ahmedabad's Vatva industrial estate, around 250 chemical units that depend on piped natural gas have reportedly seen their supply reduced to about 40% of contracted volumes, forcing them to operate at significantly lower capacities. Similar situations are reported in the Sanand GIDC area, where industries have been informed of receiving only about half of their contracted gas supply, potentially disrupting production and delaying orders. In Surat, industrial units in the chemical, textile, and food-processing sectors are also concerned about prolonged disruptions, which could lead to partial or complete shutdowns and increased production costs.
The broader Indian energy market is also feeling the strain. India, being the world's fourth-largest LNG buyer, is vulnerable to disruptions from key suppliers like Qatar, which accounts for approximately 40% of India's LNG imports. Petronet LNG, India's largest LNG importer, has also issued a force majeure notice to QatarEnergy and domestic buyers like GAIL (India), Indian Oil Corporation, and Bharat Petroleum Corporation due to vessel constraints and halted production at Qatar's Ras Laffan facility following drone attacks. This has led to a significant reduction in gas availability for many industrial clusters, with some reporting a 50% cut in supply.
Other gas distribution companies are also responding to the supply crunch. Adani Total Gas Ltd (ATGL) has imposed supply curbs on some large industrial consumers, asking them to curtail consumption to 40% of their contracted volumes. However, ATGL has kept prices unchanged for CNG and piped cooking gas supplied to households, as about 70% of their gas volumes are sourced domestically. For industrial users exceeding the 40% limit, spot market rates, which are significantly higher, will apply.
The crisis highlights India's heavy reliance on energy imports from the Middle East. Moody's Ratings has warned that prolonged disruptions could lead to pressure on the rupee, higher inflation, and a widening current account deficit for India, given its dependence on the region for about 46% of its oil and natural gas requirements. The blocking of the Strait of Hormuz, a critical energy shipping route, is a major concern, with any prolonged blockage posing substantial risks to global energy security and market stability.
Overall, the situation underscores the fragility of global energy supply chains in the face of geopolitical conflicts and the significant impact such disruptions can have on industrial output and the economy in India. The uncertainty surrounding the duration of the Middle East conflict and its implications for gas supplies means that industries will likely face continued challenges in the near to medium term.
Frequently Asked Questions
What is 'force majeure' and why has Gujarat Gas invoked it?
Force majeure is a legal clause that frees a party from liability if they cannot fulfill contractual obligations due to extraordinary circumstances beyond their control. Gujarat Gas invoked it because the ongoing war in the Middle East has severely constrained the availability of regasified liquefied natural gas (R-LNG), making it impossible for them to meet contracted supply volumes to industrial customers.
How is the Middle East conflict impacting gas supplies in India?
The conflict has disrupted global energy routes, including the Strait of Hormuz, a critical shipping lane. This has led to a halt in production at key LNG facilities, such as Qatar's Ras Laffan, and consequently, a significant reduction in R-LNG availability for India, which relies heavily on imports from the region.
Which industries in Gujarat are most affected by the gas supply cuts?
Industries that rely heavily on piped natural gas are most affected. This includes major manufacturing clusters like the ceramic industry in Morbi, as well as chemical, textile, and other energy-intensive sectors in areas like Ahmedabad and Surat. Some ceramic units have already begun shutting down operations due to the severe gas shortage.
Are domestic consumers and CNG users affected by these gas supply restrictions?
According to reports, companies like Adani Total Gas have maintained stable prices and supply for domestic piped cooking gas (PNG) and compressed natural gas (CNG) for vehicles. Their domestic supply is largely sourced locally, making these consumer segments less impacted by the international supply disruptions.
What are the potential long-term economic implications for India due to these disruptions?
India's heavy reliance on energy imports from the Middle East means that prolonged disruptions could lead to higher inflation, pressure on the Indian Rupee, and a widening current account deficit. This could complicate monetary policy and fiscal management, especially if the government needs to increase subsidies to offset the economic shock.
