Updated February 4th, 2024 at 12:35 IST
Red Sea attacks haven't disrupted crude oil supplies to India: HPCL Chairman
The rerouting of shipping vessels via the Cape of Good Hope, has led to an increase in freight costs.
Red Sea attacks: Hindustan Petroleum Corporation Ltd (HPCL) Chairman Pushp Kumar Joshi has confirmed that the ongoing attacks by Houthi militants in the Red Sea have not impacted the flow of crude oil to India. However, he acknowledged that the rerouting of shipping vessels via the Cape of Good Hope, a response to the attacks, has led to an increase in freight costs.
India, as the world's third-largest oil importer, receives a significant portion of its Russian supplies through the Red Sea. Russian supplies constituted over 35 per cent of total crude imports in 2023, amounting to 1.7 million barrels per day. Although Russian ships and cargoes have not been the primary targets of the attacks, rerouting ships around the southern tip of Africa instead of transiting through the Suez Canal and Red Sea has extended voyage durations, causing a shortage of ships and a subsequent rise in freight charges.
No anticipated supply disruptions
During a post-third quarter earnings call with investors, Joshi assured investors that HPCL has secured crude oil supplies until mid-April and that there are no anticipated supply disruptions. Approximately 44–45 per cent of HPCL's crude oil needs are met through term contracts with national oil companies, such as those in Saudi Arabia and Iraq. The remaining percentage is sourced from the spot market.
While there are no current disruptions in crude oil supplies, the rerouting of ships could lead to inflated insurance costs and potentially impact refining margins. Shippers are avoiding the Red Sea and Bab al-Mandab Strait following a US-led coalition strike on Iran-backed Houthi militants in northern Yemen. The longer voyages resulting from this rerouting have notably affected diesel exports to Europe, impacting diesel cargo costs.
Due to the altered voyage routes through the Cape of Good Hope instead of the Suez Canal, shipments from India to the US are expected to take an additional 10–14 days, while shipments from Europe and the Mediterranean will experience delays of 20–25 days.
(with PTI inputs)
Published January 28th, 2024 at 17:29 IST