Oil production is currently volatile; procurement more on base: HPCL Chief

View of HPCL headquarters. File | Photo credit: The Hindu

Current oil sourcing is highly volatile and unpredictable and Hindustan Petroleum buys more on a delivery basis than free-on-board (FOB) and forward contracts, Vikas Kaushal, chairman and managing director (CMD) of the state-run oil marketing company told analysts on Friday (Oct 20263).

Purchases on a delivery basis mean that the seller bears the cost and associated risks of transporting the oil until it arrives at the buyer’s port or facility.

“All I can say is if you look at gross premiums and landing costs: there are times when there are premiums and there are times when you can even pick them up at discounts. It’s very much the ‘Wild West’ right now,” he said.

Separately, Mr. Kaushal also explained that there may be instances of discounts even though the shipping charges may be very high at that time.

“Carriage rates doubled quarter-on-quarter”

Srividya Venkataraman, Director (Finance) informed analysts that transportation costs doubled between the first quarter and the second quarter.

It found that shipping costs for a Suezmax tanker rose to $9 a barrel in June from about $4 a barrel.

Although Mr. Kaushal also stated that the cost of landing may not be as high as it may seem.

“Oil producers are also stuck. And so the astronomical shipping rates that you see: when you get a good deal you can get are almost producer-driven,” he explained, adding, “So, the net back to the producers in many situations, especially those that are stuck or where oil is stuck right now, the net reserves are much lower than what’s in the public domain.”

The HPCL chief also told analysts that the company is buying more based on the expected occasions when it is cheaper to ship a ship. He added that this is also to prevent the likelihood of the ship being attacked en route.

Insufficient use of LPG

Ms. Venkataraman informed that the liquefied petroleum gas (LPG) shortfall stood at ₹ 245 per cylinder in October and is expected to be ₹ 327 per cylinder in November.

It added that the total unutilized quantity of LPG at the end of September was ₹500 crore.

Separately, Mr. Kaushal also informed analysts that Hindustan Petroleum has a combined twenty-day supply of petrol and diesel. This does not include the oil currently being processed in their refineries.

Published – 23 Oct 2026 21:55 IST