Indian Oil Plans to Buy Tankers Amid Rising Shipping Costs

By Staff, Agencies

India’s largest state-owned oil refiner, Indian Oil Corporation (IOC), is considering purchasing its own crude oil and liquefied petroleum gas (LPG) tankers as freight costs continue to rise amid the Middle East conflict.

Owning shipping capacity would give the company greater control over its supply chain and help contain transportation expenses as energy prices remain elevated.

IOC currently operates three crude oil carriers and nine LPG vessels under long-term charter agreements.

Transporting crude under these arrangements costs approximately $2 to $2.50 per barrel, compared with spot-market freight rates of $8 to $10, IOC Finance Director Anuj Jain said during an earnings call on October 31.

The company's board has already approved the proposed purchases, and tenders were issued several months ago.

However, IOC has not disclosed how many vessels it intends to acquire, their estimated cost or the expected delivery schedule. It is also exploring the possibility of having the ships built domestically under the government's Make in India initiative.

LPG shipping costs have also surged, with spot-market freight rates climbing to $160–180 per metric ton from around $40 previously. Existing charter agreements have helped IOC maintain supplies and limit transportation expenses during the disruption.

The US-Iran conflict has disrupted commercial shipping around the Strait of Hormuz, driving up freight rates and war-risk insurance costs. Before the conflict, the strategic waterway connecting the Persian Gulf to the Gulf of Oman handled approximately one-fifth of global oil and gas shipments.

India imports nearly 90% of its crude oil requirements, with around 30% currently passing through the strait. The route also carries most of the country's LPG imports, making disruptions a significant concern for Indian refiners.

IOC has also diversified its crude procurement amid the crisis. Russia accounted for 55% of the company's crude purchases during the first half of the current financial year, while Middle Eastern supplies represented 24%.

Despite the disruptions, the company has maintained refinery operations and increased its crude inventories to approximately 39 days of cover, compared with its usual reserve of 33 to 35 days.