HPCL Shifts to Delivered-Basis Crude Purchases as Hormuz Freight Costs Double

Hindustan Petroleum Corporation Limited is increasingly buying Middle Eastern crude on a delivered basis, with Chairman Vikas Kaushal stating that "almost everything we are looking at is on landed basis" as producers with stranded cargoes offer discounts to offset record freight costs. HPCL's finance chief said freight rates doubled in July–September compared with the previous quarter, with Suezmax shipping costs rising to about $9 per barrel from $3–4 in the June quarter. Delivered cargoes previously accounted for about half of HPCL's crude imports

<p class="ds-markdown-paragraph" style="margin: 16px 0px; color: rgb(15, 17, 21); font-family: quote-cjk-patch, Inter, system-ui, -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Oxygen, Ubuntu, Cantarell, "Open Sans", "Helvetica Neue", sans-serif; font-size: 16px;">Hindustan Petroleum Corporation Limited has fundamentally shifted its crude procurement strategy in response to the freight cost shock emanating from the Strait of Hormuz, with Chairman Vikas Kaushal telling analysts that the state-run refiner is now buying almost entirely on a delivered basis. "For all practical purposes right now almost everything we are looking at is on landed basis except where we think we can send a ship and pick it up cheaper," Kaushal said on an analyst call following HPCL's September-quarter earnings . The statement marks a significant operational adjustment for a refiner that directly operates three refineries with a combined capacity of 670,000 barrels per day.<a href="https://www.zawya.com/en/world/commodities/freight-discounts-prompt-indias-hpcl-to-buy-oil-on-delivered-basis-1848884" target="_blank" rel="noreferrer" aria-label="6" style="color: rgb(57, 100, 254); transition: box-shadow 0.2s cubic-bezier(0.4, 0, 0.2, 1); border-color: rgba(255, 255, 255, 0); border-width: 2px 3px; margin-left: -3px; margin-right: -3px; text-decoration: none; position: relative;"></a><a href="https://sa.marketscreener.com/news/freight-discounts-prompt-india-s-hpcl-to-buy-oil-on-delivered-basis-ce785cdfd988f02c" target="_blank" rel="noreferrer" aria-label="11" style="color: rgb(57, 100, 254); transition: box-shadow 0.2s cubic-bezier(0.4, 0, 0.2, 1); border-color: rgba(255, 255, 255, 0); border-width: 2px 3px; margin-left: -3px; margin-right: -3px; text-decoration: none; position: relative;"></a><p class="ds-markdown-paragraph" style="margin: 16px 0px; color: rgb(15, 17, 21); font-family: quote-cjk-patch, Inter, system-ui, -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Oxygen, Ubuntu, Cantarell, "Open Sans", "Helvetica Neue", sans-serif; font-size: 16px;">The economics driving the shift are stark. HPCL's finance chief Srividya Venkataraman said freight rates doubled in the July–September quarter compared with the previous quarter, with the cost of shipping crude on a Suezmax tanker rising to about $9 per barrel from $3–4 in the June quarter . At those levels, the freight component of delivered crude becomes a dominant variable rather than a minor add-on, and the incentive to transfer that exposure to producers becomes overwhelming. For a refiner processing hundreds of thousands of barrels per day, even a few dollars per barrel in freight differential translates into substantial quarterly cost swings.<a href="https://www.zawya.com/en/world/commodities/freight-discounts-prompt-indias-hpcl-to-buy-oil-on-delivered-basis-1848884" target="_blank" rel="noreferrer" aria-label="6" style="color: rgb(57, 100, 254); transition: box-shadow 0.2s cubic-bezier(0.4, 0, 0.2, 1); border-color: rgba(255, 255, 255, 0); border-width: 2px 3px; margin-left: -3px; margin-right: -3px; text-decoration: none; position: relative;"></a><a href="https://sa.marketscreener.com/news/freight-discounts-prompt-india-s-hpcl-to-buy-oil-on-delivered-basis-ce785cdfd988f02c" target="_blank" rel="noreferrer" aria-label="11" style="color: rgb(57, 100, 254); transition: box-shadow 0.2s cubic-bezier(0.4, 0, 0.2, 1); border-color: rgba(255, 255, 255, 0); border-width: 2px 3px; margin-left: -3px; margin-right: -3px; text-decoration: none; position: relative;"></a><p class="ds-markdown-paragraph" style="margin: 16px 0px; color: rgb(15, 17, 21); font-family: quote-cjk-patch, Inter, system-ui, -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Oxygen, Ubuntu, Cantarell, "Open Sans", "Helvetica Neue", sans-serif; font-size: 16px;">The delivered-basis model transfers both freight and security risk to the seller. By buying crude on a landed basis, HPCL avoids exposing its own vessels to attacks in the Strait of Hormuz and the broader Gulf region, and it locks in a known cost rather than bearing the risk of further freight spikes . The trade-off is that delivered prices may embed a premium, but Kaushal suggested the impact on landed prices is less than external observers might assume. "The impact on landed prices might not be as much as you guys think from outside because the producers of oil are also stuck," he said, adding that returns to producers with stranded cargoes were much lower than publicly reported .<a href="https://www.zawya.com/en/world/commodities/freight-discounts-prompt-indias-hpcl-to-buy-oil-on-delivered-basis-1848884" target="_blank" rel="noreferrer" aria-label="6" style="color: rgb(57, 100, 254); transition: box-shadow 0.2s cubic-bezier(0.4, 0, 0.2, 1); border-color: rgba(255, 255, 255, 0); border-width: 2px 3px; margin-left: -3px; margin-right: -3px; text-decoration: none; position: relative;"></a><a href="https://sa.marketscreener.com/news/freight-discounts-prompt-india-s-hpcl-to-buy-oil-on-delivered-basis-ce785cdfd988f02c" target="_blank" rel="noreferrer" aria-label="11" style="color: rgb(57, 100, 254); transition: box-shadow 0.2s cubic-bezier(0.4, 0, 0.2, 1); border-color: rgba(255, 255, 255, 0); border-width: 2px 3px; margin-left: -3px; margin-right: -3px; text-decoration: none; position: relative;"></a><p class="ds-markdown-paragraph" style="margin: 16px 0px; color: rgb(15, 17, 21); font-family: quote-cjk-patch, Inter, system-ui, -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Oxygen, Ubuntu, Cantarell, "Open Sans", "Helvetica Neue", sans-serif; font-size: 16px;">The producer side of the equation explains why delivered discounts are available. With cargoes stranded or difficult to move, producers are offering discounts to offset the higher freight costs that buyers would otherwise face. This creates a market in which the headline freight rate and the effective delivered cost diverge, and refiners with the balance-sheet capacity to negotiate delivered terms can capture some of that gap. HPCL's shift is therefore not merely defensive — it is an attempt to extract value from a disrupted market by exploiting producers' need to move cargo.<p class="ds-markdown-paragraph" style="margin: 16px 0px; color: rgb(15, 17, 21); font-family: quote-cjk-patch, Inter, system-ui, -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Oxygen, Ubuntu, Cantarell, "Open Sans", "Helvetica Neue", sans-serif; font-size: 16px;">The shift is a significant change in HPCL's procurement mix. Delivered cargoes previously accounted for about half of the company's crude imports, according to Kaushal . The move toward an almost entirely delivered-basis approach represents a substantial reorientation of how HPCL sources its feedstock, and it reflects a broader pattern across Asian refiners facing the same freight shock. The IEA has reported that tanker rates from the Persian Gulf to Asia on large vessels climbed to over $37 per barrel by mid-October, more than five times pre-war levels, with charterers splitting cargoes across smaller Suezmax and Aframax vessels as VLCC availability tightened .<a href="https://bernama.com/tv/news.php?id=2623941" target="_blank" rel="noreferrer" aria-label="4" style="color: rgb(57, 100, 254); transition: box-shadow 0.2s cubic-bezier(0.4, 0, 0.2, 1); border-color: rgba(255, 255, 255, 0); border-width: 2px 3px; margin-left: -3px; margin-right: -3px; text-decoration: none; position: relative;"></a><a href="https://www.zawya.com/en/world/commodities/freight-discounts-prompt-indias-hpcl-to-buy-oil-on-delivered-basis-1848884" target="_blank" rel="noreferrer" aria-label="6" style="color: rgb(57, 100, 254); transition: box-shadow 0.2s cubic-bezier(0.4, 0, 0.2, 1); border-color: rgba(255, 255, 255, 0); border-width: 2px 3px; margin-left: -3px; margin-right: -3px; text-decoration: none; position: relative;"></a><a href="https://sa.marketscreener.com/news/freight-discounts-prompt-india-s-hpcl-to-buy-oil-on-delivered-basis-ce785cdfd988f02c" target="_blank" rel="noreferrer" aria-label="11" style="color: rgb(57, 100, 254); transition: box-shadow 0.2s cubic-bezier(0.4, 0, 0.2, 1); border-color: rgba(255, 255, 255, 0); border-width: 2px 3px; margin-left: -3px; margin-right: -3px; text-decoration: none; position: relative;"></a><p class="ds-markdown-paragraph" style="margin: 16px 0px; color: rgb(15, 17, 21); font-family: quote-cjk-patch, Inter, system-ui, -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Oxygen, Ubuntu, Cantarell, "Open Sans", "Helvetica Neue", sans-serif; font-size: 16px;">Beyond the procurement shift, HPCL also provided an operational update on its Rajasthan refinery. Kaushal said the 180,000-barrel-per-day facility is operating at 60% capacity and is expected to reach full capacity by end-December or early January, with high-sulphur fuel oil production expected to begin in December . The refinery's ramp-up is a separate but related development for India's refining sector, adding domestic capacity at a time when import costs and supply chain risk are elevated.<a href="https://www.zawya.com/en/world/commodities/freight-discounts-prompt-indias-hpcl-to-buy-oil-on-delivered-basis-1848884" target="_blank" rel="noreferrer" aria-label="6" style="color: rgb(57, 100, 254); transition: box-shadow 0.2s cubic-bezier(0.4, 0, 0.2, 1); border-color: rgba(255, 255, 255, 0); border-width: 2px 3px; margin-left: -3px; margin-right: -3px; text-decoration: none; position: relative;"></a><a href="https://sa.marketscreener.com/news/freight-discounts-prompt-india-s-hpcl-to-buy-oil-on-delivered-basis-ce785cdfd988f02c" target="_blank" rel="noreferrer" aria-label="11" style="color: rgb(57, 100, 254); transition: box-shadow 0.2s cubic-bezier(0.4, 0, 0.2, 1); border-color: rgba(255, 255, 255, 0); border-width: 2px 3px; margin-left: -3px; margin-right: -3px; text-decoration: none; position: relative;"></a><p class="ds-markdown-paragraph" style="margin: 16px 0px; color: rgb(15, 17, 21); font-family: quote-cjk-patch, Inter, system-ui, -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Oxygen, Ubuntu, Cantarell, "Open Sans", "Helvetica Neue", sans-serif; font-size: 16px;">For the shipping and logistics sector, HPCL's shift illustrates how freight market disruption reshapes commercial relationships along the supply chain. When freight becomes the dominant cost variable, the entity best positioned to manage that risk absorbs it, and the terms of trade adjust accordingly. HPCL's move toward delivered crude transfers risk to producers and traders, but it also reduces HPCL's direct exposure to vessel security and freight volatility — a rational response to an environment in which the cost of moving oil has become as unpredictable as the price of the oil itself.<p class="ds-markdown-paragraph" style="margin: 16px 0px; color: rgb(15, 17, 21); font-family: quote-cjk-patch, Inter, system-ui, -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Oxygen, Ubuntu, Cantarell, "Open Sans", "Helvetica Neue", sans-serif; font-size: 16px;">Looking ahead, the durability of HPCL's delivered-basis strategy will depend on whether producers continue to offer discounts and whether freight rates remain elevated. If the Hormuz disruption eases and freight normalizes, the incentive to buy delivered may diminish, and HPCL could revert toward a more balanced mix. If disruption persists, the delivered model may become the default for Indian refiners, embedding a structural shift in how crude moves from the Gulf to India's west coast refineries. Either way, HPCL's disclosure provides a rare window into how an Indian refiner is adapting its procurement to a freight market that has been fundamentally altered by security risk.

HPCL Shifts to Delivered-Basis Crude Purchases as Hormuz Freight Costs Double

Haulage Times Daily Intelligence