New Delhi: Oil marketing company Indian Oil Corporation (IOC) plans to buy some ships of its own for importing crude oil and liquefied petroleum gas (LPG) in order to establish a more reliable supply chain and minimise disruptions due to geopolitical uncertainties such as the West Asia conflict.
Indian Oil’s Director, Finance, Anuj Jain, said during the company’s earnings call last week that tenders for the purchase of a few vessels were issued some months ago. The company currently has three crude oil tankers and nine LPG carriers on time charter, which have helped it manage shipping costs during the West Asia conflict when spot rates for shipping have soared.
Freight rates for LPG have also increased sharply. Spot rates have risen to around $160–$180 per tonne from normal levels of about $40 per tonne. The increase comes amid the increasing attacks on merchant ships passing through the Strait of Hormuz, a waterway through which 20 per cent of the world’s energy exports transit during normal times.
During the October 31 earnings call, Jain said Indian Oil was working on three areas of its shipping operations. These include managing its existing chartered fleet, purchasing vessels, and exploring options to build ships in India.
Apart from buying ships, Indian Oil is also looking at options to place orders for ships with Indian shipyards under the government’s Make in India policy.
The refiner had earlier explored plans to acquire four medium-range vessels through an arrangement involving Shipping Corporation of India and other state-run oil companies.
Indian Oil has long-term shipping contracts in place which have cushioned the company from the sharp hike in freight rates due to the Iran war. With the Houthi rebels taking control of the coastal areas in Yemen around the Red Sea, the situation has become worse, according to senior officials.
The oil giant pays around $2–$2.50 per barrel to transport crude oil under its long-term charter arrangements, while spot market rates have surged to $8–$10 per barrel.
The company also has nine LPG carriers on time charter. Spot freight charges for LPG shipments have shot up to around $160–$180 per tonne, compared with about $40 per tonne earlier.
Indian Oil has also diversified its crude imports amid the closure of the Strait of Hormuz, with more supplies being sourced outside West Asia from countries such as Russia, Venezuela, Brazil and countries in Africa.
During the first half of FY27, around 87 per cent of Indian Oil’s crude purchases were made in the spot market, compared with about 50 per cent in the previous financial year. Russian crude accounted for around 55 per cent of the purchases during the six-month period, while West Asian supplies came down to around 24 per cent.
The Indian basket of crude imports, which averaged around $65-70 per barrel before the Iran war broke out in February, shot past the $100 mark in March and averaged about $120 per barrel in October, Jain said.
Apart from cutting costs by buying more Russian crude, the company has been buying cheap heavy crude from Venezuela, which can be processed at its Paradip refinery on the Odisha coast.
(IANS)
