Indian Oil to buy its own crude and LPG ships as West Asia conflict lifts freight costs

Indian Oil Corporation (IOC), the country’s largest oil refiner and fuel retailer, plans to buy its own ships to carry crude oil and liquefied petroleum gas (LPG), after the conflict in West Asia exposed how much it depends on hired tankers.

IOC’s board has cleared buying a few vessels, for which tenders went out several months ago, Director (Finance) Anuj Jain told analysts on IOC’s earnings call for the July–September quarter. He did not say how many ships it will buy or when.

Why it matters

IOC now has three crude oil tankers and nine LPG carriers on time charter, meaning hired for a fixed period. Under its long-term charters, it pays about $2 to $2.50 a barrel to bring crude to India, while spot rates for a single voyage have jumped to $8 to $10 a barrel since the fighting involving the United States and Iran disrupted shipping in the Gulf, according to reports of the call.

India imports more than 85% of the crude oil it uses, so freight costs feed into what refiners pay and, eventually, into fuel prices.

The plan

Mr. Jain said the country needs oil companies to pay more attention to shipping. IOC is looking at three approaches: making better use of its existing charters, owning ships, and supporting shipbuilding in India, including the possibility of having vessels built in Indian yards under the Make in India programme.

What’s next

The company has not named a shipyard, said how many vessels it will buy or announced an order.