During a recent earnings call, HPCL’s CEO, Joshi, assured investors that the company has secured crude oil supplies until mid-April, and there are currently no foreseen disruptions in the supply chain. This proactive arrangement contributes to the company’s stability and minimizes potential risks related to the availability of crude oil. The assurance reflects HPCL’s strategic planning to ensure a consistent and uninterrupted supply of essential resources, emphasizing its commitment to maintaining operational efficiency and meeting market demands.
HPCL Chairman Pushp Kumar Joshi assured investors that the attacks on shipping vessels in the Red Sea by Houthi militants haven’t disrupted India’s crude oil flow. However, due to rerouting through the Cape of Good Hope, freight costs have surged. India, the third-largest global oil importer, relies heavily on Russian supplies via the Red Sea, constituting over 35% of total crude imports in 2023, reaching 1.7 million barrels per day. While Russian ships remain non-targets, the rerouting has led to longer voyages, causing a shortage of ships and increased freight charges.
During a post-third quarter earnings call with investors, Joshi stated that HPCL has secured crude oil supplies until mid-April, mitigating potential disruptions. Approximately 44-45% of HPCL’s crude oil needs are fulfilled through term contracts with national oil companies, with the remaining sourced from the spot market. Despite the Red Sea crisis, both term and spot crude imports remain unaffected, providing stability to HPCL’s operations.
Joshi emphasized that the company’s term “crude has not been impacted” by the Red Sea crisis, and spot imports, arranged on DES basis by the supplier, are also unaffected. He underscored that HPCL has navigated through the challenges, ensuring a continuous supply chain. While acknowledging the rise in freight charges, Joshi’s assurances aimed to allay concerns about potential disruptions and affirmed the company’s resilience in managing the complexities introduced by the Red Sea crisis.
As India grapples with the challenges posed by the evolving situation, HPCL’s proactive measures, including securing crude oil supplies and maintaining a diversified sourcing strategy, reflect its commitment to sustaining a reliable and uninterrupted energy supply. The chairman’s communication with investors aimed to provide clarity on the company’s operational status and its ability to navigate through external challenges, ultimately reinforcing confidence in HPCL’s resilience amid dynamic geopolitical circumstances affecting global oil trade routes.
HPCL Chairman Pushp Kumar Joshi assured investors that crude oil supplies have been secured until the fiscal year-end in March and the first weeks of April, alleviating concerns about disruptions. While acknowledging the impact on freight rates due to the Red Sea crisis, Joshi expressed confidence in meeting supply requirements. Spot imports, including discounted Russian oil, constitute a significant portion of HPCL’s crude oil imports. Joshi stated that Russian oil accounted for 30% of all crude oil imported by HPCL in 2023. Despite potential challenges, the company remains well-prepared on the procurement side until late April.
He emphasized that while the rerouting of ships could affect insurance costs and refining margins, the primary focus is on ensuring a stable supply chain. The geopolitical situation in the Red Sea, with shippers avoiding certain routes, has led to longer voyages impacting diesel cargo costs. Diesel exports to Europe have been affected, resulting in increased costs of USD 850,000-1 million for diesel cargoes.
The decision to reroute voyages through the Cape of Good Hope instead of the Suez Canal has introduced delays in shipments from India to the US (additional 10-14 days) and from Europe/the Mediterranean (additional 20-25 days). Despite these challenges, Joshi’s reassurances highlight HPCL’s proactive measures in securing crude oil supplies and navigating through the complexities introduced by the Red Sea crisis. The company’s focus on maintaining a comfortable situation on the procurement side reflects its commitment to uninterrupted operations, reinforcing confidence among investors amidst evolving global circumstances impacting oil trade routes.