public Indian Oil Corporation (IOC), the sector’s largest oil marketing company, is planning to buy cargo ships for transportation of its own crude oil and liquid petroleum gas (LPG). India’s largest oil refiner is forced to take these steps to maintain tight control over its energy supply chain due to severe problems in the movement of cargo ships around the Strait of Hormuz and rising rental costs.
IOC’s Board of Directors has already approved the purchase of some cargo ships.
Indian Oil Corporation Director (Finance) Anuj Jain, speaking to analysts after the second quarter financial results, said that the company’s board of directors has already approved the purchase of some cargo ships and tenders for the same were issued several months ago. Anuj Jain said, “At this time the oil sector companies in the country need to focus more on the shipping sector.”
The company is also exploring the possibility of building ships in India.
Anuj Jain further said that Indian Oil Corporation is also exploring the possibility of manufacturing ships in India under the government’s ‘Make in India’ initiative. The importance of securing shipping capacity has increased even more as geopolitical tensions in West Asia disrupt commercial traffic near the Strait of Hormuz. He said that Indian Oil currently has three crude oil vessels and 9 LPG vessels on hire for a fixed period.
LPG freight rates have become 160-180 US dollars per ton.
These ship arrangements have provided significant cost savings during the current crisis. The company’s fixed-term crude oil vessels cost around US$2.00 to US$2.50 per barrel, compared to US$8 to US$10 per barrel in the spot market. He said LPG freight rates, which normally hover around US$40 per tonne, have increased to US$160-180 per tonne in the spot market.
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