IOC to buy crude, LPG ships as West Asia crisis exposes shipping risks

The Indian Oil Corporation (IOC) is considering acquiring its own crude oil and liquefied petroleum gas (LPG) shipping vessels amid disruptions in West Asia shipping lanes and escalating freight costs. The company's board has approved purchasing several vessels, with tenders issued in recent months. IOC's Finance Director Anuj Jain revealed the move during the company's second-quarter earnings call, noting the company's exploration of building ships in India under the government's Make in India initiative.

IOC currently has three crude oil vessels and nine LPG vessels on time charter, which have provided cost savings during the current crisis. The shipping strategy aims to diversify crude procurement and reduce exposure to supply disruptions. In the first half of the current financial year, IOC sourced 55% of its crude requirements from Russia, 24% from the Middle East, 10% from Africa, 7% from Brazil, 2-5% from the United States, and 3-4% from Venezuela.

Spot imports now make up 87% of crude sourcing, up from 50% in the previous financial year. IOC has negotiated discounts over benchmark crude prices, ranging from a USD 5 per barrel discount to a USD 12 per barrel premium. Despite supply-chain disruptions, IOC has maintained refinery operations and increased crude inventories to about 39 days, up from the usual 33-35 days.

The company reported a net profit of Rs 21,630 crore in the September quarter, up from a loss in the previous quarter.