Indian Oil plans to buy ships as freight costs surge
The state-owned oil major is looking to acquire its own carriers and explore domestic shipbuilding to manage rising transportation expenses.
Indian Oil Corporation (IOC) plans to purchase its own crude oil and liquefied petroleum gas (LPG) carriers to gain greater control over its supply chain, according to the Times of India. The company is also exploring shipbuilding opportunities in India under the government's Make in India initiative.
Director of Finance Anuj Jain stated during the company's second-quarter earnings call that the board has approved the purchase of several vessels. Tenders for these acquisitions were issued several months ago. The move comes as shipping costs rise and movement near the Strait of Hormuz faces disruptions.
Jain noted that spot-market rates for crude have reached up to $8-10 per barrel, compared to $2-2.50 per barrel for time-chartered vessels. LPG freight rates in the spot market have climbed to $160-180 per tonne from a usual $40 per tonne.
To limit exposure to disruptions, IOC has diversified its crude sourcing. Russia supplied 55 per cent of the company's requirements in the first half of the current financial year, followed by Middle Eastern countries at 24 per cent and Africa at approximately 10 per cent.
The company's reliance on spot purchases rose to around 87 per cent in the first half of FY27, up from approximately 50 per cent in the previous financial year. IOC reported a net profit of Rs 21,630 crore in the September quarter, up from a loss of Rs 2,661 crore in the preceding quarter.