Indian Oil has made a new plan, will now import crude and LPG from its ships

State-owned Indian Oil Corporation (IOC) is now planning to buy its own vessels to transport crude oil and liquefied petroleum gas (LPG). India’s largest oil refinery is looking to tighten its grip on its energy supply chain, given shipping disruptions near the Strait of Hormuz and rising freight costs. The company’s finance director Anuj Jain said during the second quarter earnings call that the company’s board has approved the purchase of some vessels and tenders for the same have been floated a few months ago. Jain said the country now needs oil companies to focus more on the shipping front. He further said that the IOC is also considering the possibility of manufacturing ships in India under the government’s ‘Make in India’ initiative.

Why does the company want to buy the ship?

The move could be a major shift in the company’s shipping strategy. Hitherto the company mainly operated vessels through ‘time-charter’ (hired for a fixed period) and ‘voyage-charter’ (hired for a fixed journey). Now the IOC is considering three options: reforming the existing charter system, buying its own ships and promoting shipbuilding in the country. Securing shipping capacity has also become important as geopolitical tensions in West Asia affect trade movements near the Strait of Hormuz. This led to an increase in freight rates and the cost of ‘war-risk insurance’ (war risk insurance).

How much does a ‘time-charter’ ship cost?

Jain said that currently IOC has three crude oil ships and 9 LPG ships on ‘time-charter’. During the current crisis, these arrangements have helped the company a lot in saving costs. The price of the company’s ‘time-charter’ crude oil vessels fetches around US $ 2 to 2.50 per barrel, while the same rate in the spot market (open market) reaches US $ 8 to 10 per barrel. He said LPG freight rates, which were normally US$40 per tonne, have now increased to US$160 to 180 per tonne in the spot market.

How much oil is supplied from where?

This shipping strategy is part of a larger effort to diversify sources of crude oil purchases and reduce the risk of supply disruptions. Jain said that in the first half of the current financial year, IOC imported 55 percent of its crude oil requirements from Russia, while 24 percent was supplied from the Middle East. Apart from this, about 10 percent of crude oil was supplied from Africa, 7 percent from Brazil, 2-5 percent from America and 3-4 percent from Venezuela. The company has significantly increased its reliance on ‘spot purchase’ (immediate purchase). In the first half of fiscal 2027, ‘spot imports’ accounted for around 87 per cent of total crude oil purchases, compared to around 50 per cent in the previous fiscal.

Oil bought at a discount

Jain said that despite extreme fluctuations in global crude oil markets, the company was able to achieve discounts to benchmark prices. During the September quarter, premiums or discounts given to benchmark crude oil prices ranged from a discount of $5 per barrel to a premium of $12 per barrel. In comparison, the previous quarter ranged from zero to $18 per barrel. IOC continues to buy Russian crude, which the company said was bought at a ‘fair price’. Apart from this, the company is also processing Venezuelan crude oil.

Crude oil prices increased

In late February, after tensions between the US and Iran escalated, oil prices surged, prompting the company to take steps to diversify its sources of crude oil purchases. Jain said the average price of ‘Indian basket’ crude oil was around $65-70 per barrel in February, having remained above $100 per barrel for most of the first quarter. Its average price in October was around $120 a barrel. Despite the supply-chain disruption, IOC maintained healthy refinery operations. Also, the company has increased the crude oil stock (inventory) requirement to about 39 days, which is usually 33-35 days. Apart from this, the company also had 20 days of LPG and 23-25 ​​days of petrol and diesel.

The company made huge profits

IOC in September quarter Rs. 21,630 crore in net profit. In comparison, the company last quarter earned Rs. 2,661 crore in loss, while in the same period last year it posted a loss of Rs. 7,610 crore profit was made. According to the company, the company has been profitable due to gains in inventory and better performance in several other business segments. During the quarter, the company’s ‘gross refining margin’ was $18.52 per barrel (excluding the impact of special additional excise duty).

Also, during this period, the company sold from inventory Rs. 6,948 crore profit was made. Jain cautioned that geopolitical developments are a major source of uncertainty for the company, particularly due to their impact on crude oil procurement, freight and marketing margins. The proposed purchase of vessels and the domestic shipbuilding initiative reflect a broader effort by Indian oil companies to strengthen logistics. This is because India is still largely dependent on imported crude oil and foreign shipping routes.