Home / Business and Economy / India's Oil Giant Buys Ships to Cut Soaring Freight Costs
India's Oil Giant Buys Ships to Cut Soaring Freight Costs
8 Nov
Summary
- State-owned IOC is buying its own oil and LPG vessels.
- Own tankers offer substantial savings over spot market rates.
- Geopolitical tensions drive up shipping costs significantly.
Indian Oil Corp. (IOC) is taking decisive steps to enhance its control over energy logistics by acquiring dedicated crude oil and liquefied petroleum gas (LPG) vessels. This strategic initiative is a direct response to escalating freight expenses and heightened maritime security concerns near the Strait of Hormuz.
Director of Finance Anuj Jain confirmed board approval for these vessel purchases, with tenders already issued. IOC is also exploring domestic shipbuilding under the 'Make in India' initiative, signaling a potential shift from its traditional reliance on chartered shipping.
The company's existing fleet of three crude oil and nine LPG vessels, operating on time charter, has reportedly achieved considerable cost savings. Crude carriers under time charter cost approximately $2-$2.50 per barrel, a stark contrast to the $8-$10 per barrel on the spot market. Similarly, spot market rates for LPG have surged to $160-180 per tonne, a substantial increase from the usual $40 per tonne.
IOC's expanded spot market purchasing in the first half of FY27 accounted for about 87% of its crude sourcing, a significant rise from approximately 50% in the previous fiscal year. The company has managed to secure discounts despite market volatility, with crude pricing ranging from a $5-per-barrel discount to a $12-per-barrel premium over benchmarks in the September quarter.
