In a bid to bolster energy security, India’s public sector oil and gas companies are exploring the acquisition of ships for the transportation of oil and gas. This directive from the Union government comes at a critical juncture marked by surging crude oil prices, restrictions on Russian oil imports, and a prohibition on the use of Russian vessels for oil and gas transport.
One of the sources privy to this development remarked, “The government has been encouraging oil companies to procure ships, but the availability of suitable vessels is a challenge.” Despite this hurdle, major oil corporations are actively seeking out these vessels.
The calculus behind this initiative is firmly rooted in the fluctuations of the energy market, particularly in the aftermath of Russia’s incursion into Ukraine. The resultant sanctions on Russian ship transport by Western nations led to a scarcity of vessels and the emergence of new players in the oil transport sector. Russia has become India’s primary oil supplier over the past year, intensifying the need for alternate transportation options.
It’s worth noting that freight charges wield significant influence over the retail prices of petrol and diesel, which have remained persistently high and unyielding for over a year.
While international oil prices have moderated since last year’s multi-year highs, recent months have witnessed a resurgence. As of September 14, India’s crude basket price stood at $94.17 per barrel, compared to June’s average of $74.93 per barrel.
The move to encourage state-run oil companies to invest in ships coincides with India’s diversification of oil import sources. Despite Russia contributing only 2% of India’s oil imports historically, it constituted a quarter of the 235.52 million tonnes of crude oil imported by India. The country witnessed a nearly three-fold increase in oil imports from Russia in the first quarter of this fiscal year, coinciding with a decline in oil imports from traditional suppliers in West Asia.
The spokespersons for Indian Oil Corp. Ltd, Bharat Petroleum Corp. Ltd, and Hindustan Petroleum Corp. Ltd, as well as the petroleum ministry, did not respond to inquiries by press time. ONGC Videsh Ltd’s spokesperson claimed no knowledge of such developments.
While freight rates surged during the Russia-Ukraine conflict and the subsequent Black Sea route blockade, they have gradually eased over the past year. Nevertheless, current rates, as reported by the Drewry’s composite World Container Index, remain elevated compared to pre-pandemic levels, indicating that cost factors affecting retail fuel prices are complex and multifaceted.
This strategic push to acquire ships represents India’s commitment to ensuring a stable and resilient energy supply chain amidst a volatile global landscape.
