Indian Oil Corporation plans to acquire crude oil and liquefied petroleum gas vessels after disruptions around the Strait of Hormuz and sharply higher freight rates exposed risks in India’s imported-energy supply chain, the state-owned refiner said during its second-quarter earnings call.
IOC’s board has approved the purchase of a few vessels and tenders were issued several months ago, Director of Finance Anuj Jain said. The company is also examining whether some ships can be built in India under the government’s Make in India initiative.
Jain said Indian oil companies needed to focus more closely on shipping as geopolitical tensions in West Asia disrupted commercial movement near the Strait of Hormuz. The disruptions have increased freight rates and war-risk insurance costs for vessels using the region’s maritime routes.
IOC currently has three crude oil vessels and nine LPG vessels on time charter. The company has traditionally relied on a combination of time-chartered and voyage-chartered ships, but it is now considering three approaches: improving existing charter arrangements, owning vessels and supporting domestic shipbuilding.
The cost difference between charter arrangements and spot-market shipping has become significant. IOC’s time-chartered crude carriers cost about $2-$2.50 per barrel, compared with spot-market rates of as much as $8-$10 per barrel, Jain said. LPG freight rates that would normally be around $40 per tonne have risen to $160-$180 per tonne in the spot market.
The proposed acquisitions are part of a broader effort to reduce exposure to supply disruptions while diversifying crude procurement. Russia supplied 55 per cent of IOC’s crude requirements during the first half of the current financial year, while the Middle East accounted for 24 per cent. Africa contributed about 10 per cent, Brazil 7 per cent, the United States 2-5 per cent and Venezuela 3-4 per cent, according to Jain.
IOC has also increased its use of spot purchases. Spot imports accounted for about 87 per cent of crude sourcing in the first half of FY27, compared with about 50 per cent in the previous financial year. The company said it continued to buy Russian crude at what it described as optimal prices and was also processing Venezuelan crude.
The supply-chain changes have coincided with a sharp rise in crude prices. Indian basket crude, which averaged about $65-$70 per barrel in February, remained above $100 per barrel for much of the first quarter and averaged about $120 per barrel in October, Jain said. He added that geopolitical developments remained a key uncertainty for crude procurement, freight and marketing margins.
IOC said it had maintained refinery operations at optimal levels despite the disruptions and increased crude inventories to about 39 days, from its usual 33-35 days. It held 20 days of LPG inventory and 23-25 days of petrol and diesel stocks.
The company reported a net profit of Rs 21,630 crore in the September quarter, compared with a loss of Rs 2,661 crore in the preceding quarter and a profit of Rs 7,610 crore in the year-earlier period. It recorded a gross refining margin of $18.52 per barrel, excluding the impact of the special additional excise duty, and an inventory gain of Rs 6,948 crore.
IOC’s next steps are to progress the approved vessel purchases while evaluating the feasibility of domestic shipbuilding alongside its existing charter strategy. The company has not disclosed the number, cost or delivery schedule of the proposed ships in the information reported by Business Standard.
