Rejecting the impact of the ongoing Red Sea attacks on India’s oil imports, Hindustan Petroleum Corporation Ltd (HPCL) chairman Pushp Kumar Joshi, said that Houthi militants’ attacks on ship vessels have not affected the crude oil flows to India.
India is the world’s third-largest oil importer and remains heavily dependent on Russian supplies through the Red Sea. In 2023, Russian supplies through the Read Sea made up for over 35 per cent of India’s total crude imports in 2023, amounting to 1.7 million barrels per day.
“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,” Joshi said in a post-third quarter earnings call with investors.
The looming threat of rising freight costs
At this stage, Russian ships and cargoes are not the prime targets of Houthi attacks. However, rerouting of ships around the southern tip of Africa instead of taking the shorter route through the Suez Canal and the Red Sea has led to ships taking longer voyages. Consequentially, there is a shortage of ships and a rise in freight charges.
Russian oil makes up for 30 per cent of all crude oil imported by HPCL in 2023. Even though supplies are not being impacted, there are high chances that continuous rerouting of ships could inflate insurance costs and crimp refining margins.
Pushp Kumar Joshi also made it clear that there is no impact of the Read sea crisis on term crude and spot supplies.
“Term crude has not been impacted (due to the Red Sea crisis),” he said, adding the spot imports are on a DES basis where the shipping is arranged by the supplier. “The spot supplies too are not impacted.”
Till FY 24, and the first couple of weeks of April, HPCL has already tied up crude requirements, said Joshi. He also added that crude oil supplies have not seen any disruption as of now, but “this has definitely impacted the freight rates and freight rates have travelled northward.”
Shippers are avoiding the Red Sea and Bab al-Mandab Strait after a US-led coalition struck Iran-backed Houthi militants in northern Yemen. However, this has also impacted diesel exports to Europe. Due to the crisis, shipments from India to the US require an additional 10-14 days of journey.
Source: Livemint