IOC to buy crude, LPG ships as West Asia crisis exposes shipping risks

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Published - November 08, 2026 11:45 am IST - New Delhi

The importance of securing shipping capacity has increased as geopolitical tensions in West Asia disrupt commercial movement near the Strait of Hormuz, pushing up freight rates and war-risk insurance costs. | Photo Credit: Reuters

State-owned Indian Oil Corporation plans to acquire crude oil and liquefied petroleum gas carriers of its own as disruptions to shipping around the Strait of Hormuz and soaring freight costs prompt India's largest oil refiner to strengthen control over its energy supply chain.

The company's board has already approved the purchase of a few vessels, and tenders were issued several months ago, Director of Finance Anuj Jain said during its second-quarter earnings call.

"The country needs oil sector companies to focus more on the shipping area now," Mr.

Jain said, adding that IOC was also exploring the possibility of building ships in India under the government's Make in India initiative.

The move marks a potential shift in the company's shipping strategy, which has traditionally relied on a mix of time-charter and voyage-chartered vessels.

IOC is now examining three approaches: optimising existing charter arrangements, owning ships and supporting domestic shipbuilding.

The importance of securing shipping capacity has increased as geopolitical tensions in West Asia disrupt commercial movement near the Strait of Hormuz, pushing up freight rates and war-risk insurance costs.

IOC currently has three crude oil vessels and nine LPG vessels on time charter.

These arrangements have provided significant cost savings during the current crisis, Mr.

Jain said.

The company's time-chartered crude carriers cost around $2-2.50 per barrel, compared to spot-market rates of as much as $8-10 per barrel.

LPG freight rates, which would normally be around $40 per tonne, have risen to $160-180 per tonne in the spot market, he said.

The shipping strategy 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, while Middle Eastern supplies accounted for 24%, Mr.

Jain said.

Africa contributed about 10%, Brazil 7%, the United States 2-5% and Venezuela 3-4%.

The company has also substantially increased its reliance on spot purchases.

Spot imports accounted for about 87% of crude sourcing in the first half of FY27, compared to around 50% in the previous financial year.

Mr.

Jain said the company had been able to negotiate discounts against benchmark prices even as global crude markets remained volatile.

The premium or discount paid over benchmark crude during the September quarter ranged from a discount of $5 per barrel to a premium of $12 per barrel, compared to a range of zero to $18 per barrel in the preceding quarter.

IOC has continued to buy Russian crude at what it described as optimal prices and has also been processing Venezuelan crude.

The company's procurement diversification comes against the backdrop of a sharp rise in oil prices following the escalation of U.S.-Iran hostilities towards the end of February.

Indian basket crude, which averaged around $65-70 per barrel in February, remained above $100 for much of the first quarter and averaged about $120 per barrel in October, Mr.

Jain said.

Despite the supply-chain disruptions, IOC said it had maintained refinery operations at optimal levels and increased crude inventories to about 39 days, from its usual 33-35 days.

It was also holding 20 days of LPG inventory and 23-25 days of petrol and diesel stocks.