IOC To Buy Crude, LPG Ships As West Asia Crisis Exposes Shipping Risks

State-owned Indian Oil Corp. is moving to tighten control over its energy logistics by acquiring dedicated crude oil and liquefied petroleum gas vessels, a strategic response to escalating freight expenses and maritime instability around the Strait of Hormuz.

Speaking during the company's second-quarter earnings call, Director of Finance Anuj Jain confirmed that board approval is already in place for the vessel purchases and that tenders were floated several months ago. "The country needs oil sector companies to focus more on the shipping area now," Jain said, adding that IOC was also looking into the prospect of building ships domestically under the government's Make in India initiative.

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This signals a potential pivot from IOC's traditional reliance on time- and voyage-chartered vessels. The company is now weighing three options: optimising current charters, purchasing its own ships, and backing domestic shipbuilding.

Rising geopolitical tensions in West Asia are disrupting transit near the Strait of Hormuz, driving up freight and war-risk insurance costs and making it more critical than ever to lock in shipping capacity.

According to Jain, IOC's current fleet of three crude oil and nine LPG vessels on time charter has delivered substantial cost savings amid the ongoing crisis.

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The company's time-chartered crude carriers run about $2–$2.50 per barrel, a fraction of the $8–$10 per barrel charged on the spot market. Spot market freight rates for LPG have surged to $160–180 per tonne, a sharp climb from the typical $40 per tonne, he noted.

To shield itself from supply disruptions, IOC is leaning into this shipping strategy as part of a wider push to diversify its crude oil sources. According to Jain, the company's crude procurement during the first half of the current financial year broke down as follows:

• Russia: 55%
• Middle East: 24%
• Africa: ~10%
• Brazil: 7%
• United States: 2–5%
• Venezuela: 3–4%

IOC has significantly ramped up its spot market buying, with spot imports making up roughly 87% of its crude sourcing in the first half of FY27 — a sharp jump from around 50% in the prior fiscal year.

According to Jain, the refiner managed to secure discounts relative to benchmark rates despite ongoing volatility in global oil markets. In the September quarter, crude pricing ranged from a $5-per-barrel discount to a $12-per-barrel premium over benchmarks, narrowing from the previous quarter's range of parity to an $18-per-barrel premium.

(With PTI inputs)

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Meanwhile, IOC continues to purchase Russian crude at what it calls optimal pricing, alongside processing Venezuelan grades.

Jain noted that the company is diversifying its procurement in response to surging oil prices triggered by escalating US-Iran tensions in late February. Having averaged between USD 65 and USD 70 per barrel in February, Indian basket crude stayed above the USD 100 mark for most of the first quarter before climbing to an average of roughly USD 120 per barrel in October.

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