Indian Oil Corporation (IOC) is taking steps to secure its energy supply chain by acquiring its own crude oil and liquefied petroleum gas (LPG) carriers. The state-owned company's board has already approved the purchase of several vessels, with tenders issued months ago, as disclosed by Director of Finance Anuj Jain during the second-quarter earnings call. This shift in strategy comes amid disruptions in shipping around the Strait of Hormuz and surging freight costs due to geopolitical tensions in West Asia.
IOC is exploring three approaches to strengthen its shipping capabilities: optimizing existing charter arrangements, owning ships, and supporting domestic shipbuilding under India's Make in India initiative. The company currently operates three crude oil vessels and nine LPG vessels on time charter, which have provided cost savings during the current crisis. Time-chartered crude carriers cost around $2-2.50 per barrel, significantly lower than spot-market rates of $8-10 per barrel. LPG freight rates have skyrocketed to $160-180 per tonne, up from the usual $40 per tonne.
The move is part of a broader effort to diversify crude procurement and reduce exposure to supply disruptions. IOC sourced 55% of its crude requirements from Russia during the first half of the current financial year, with Middle Eastern supplies accounting for 24%. The company has also increased its reliance on spot purchases, which accounted for about 87% of crude sourcing in the first half of FY27, up from around 50% in the previous financial year.
Despite supply-chain disruptions, IOC maintained refinery operations at optimal levels and increased crude inventories to about 39 days, up from the usual 33-35 days. The company reported a net profit of Rs 21,630 crore in the September quarter, a significant improvement from a loss of Rs 2,661 crore in the preceding quarter. However, Jain cautioned that geopolitical developments remain a key source of uncertainty, particularly their impact on crude procurement, freight, and marketing margins.