Red Sea Attacks Push Freight Costs Up, but No Oil Flow Disruption to India, Says HPCL Head

Despite ongoing Houthi militant attacks on shipping vessels in the Red Sea, India's oil flow remains steady, albeit at a higher cost due to rerouting, assured Hindustan Petroleum Corporation Ltd (HPCL) chairman Pushp Kumar Joshi.

India, the world's third-largest oil importer, relies heavily on the Red Sea for transporting crucial Russian oil, which accounted for over 35% of its total crude imports in 2023. While Russian ships aren't prime targets, the conflict has forced vessels to navigate the longer route around the Cape of Good Hope, driving up freight charges and causing a temporary shortage of ships.

Russian ships and cargoes are not being prime targets of the attacks at this stage however rerouting of ships around the southern tip of Africa instead of transiting through the Suez Canal and Red Sea has led to ships taking longer voyages, resulting in the shortage of ships and rise in freight charges. In a post-third quarter earnings call with investors, Joshi said HPCL has tied up crude oil supplies till mid-April and it does not see any supply disruptions.

Term crude has not been impacted (due to the Red Sea crisis), he said, adding the spot imports are on DES basis where the shipping is arranged by the supplier. The spot supplies too are not impacted. HPCL, he said, has already tied up crude requirements till fiscal year end (in March) and the first couple of weeks of April. rude oil supplies have not seen any disruption as of now. This has definitely impacted the freight rates and freight rates have travelled northward. Spot imports include opportunity crude such as Russian oil which is sold at a discount because some western nations have shunned it due to Moscow's February 2022 invasion of Ukraine.

So far as supply is concerned, I am quite confident that supply requirements are being met. We also have to see how this situation unfolds in the next few weeks, basis that we will have to take a call but as far as the procurement side is concerned, I am already in a comfortable situation till March 31 and two weeks of April, he said.  Joshi stated that HPCL has secured agreements for both term and spot supplies, encompassing opportunity crude, until mid-April. He emphasized that there have been no disruptions in this regard.

Regarding imports from Russia, Joshi mentioned that Russian oil constituted 30 percent of HPCL's total crude oil imports in 2023.