Indian Oil raises LPG output nearly 30% as Hormuz disruption tests energy security

Summary

• Domestic energy response: Indian Oil Corporation (IOC) has increased LPG production by nearly 30% and operated its refineries above 100% utilisation as disruptions around the Strait of Hormuz put pressure on India’s energy supply chains.
• Supply diversification: IOC has shifted away from some Middle Eastern crude grades, diversified sourcing and realigned refinery operations while working to maintain domestic fuel and LPG supplies.
• Capacity expansion: IOC is progressing capacity additions at Panipat, Gujarat and Barauni that are expected to take its group refining capacity from 80.75 MTPA towards about 98 MTPA.

NEW DELHI, August 31, 2026 — Indian Oil Corporation (IOC) has increased its liquefied petroleum gas (LPG) production by nearly 30% and kept its refineries operating above 100% utilisation as disruptions to maritime trade through the Strait of Hormuz put India’s energy supply chains under pressure.

Addressing shareholders at the company’s 67th Annual General Meeting on Monday, IOC Chairman A. S. Sahney said the company had adjusted its crude sourcing and refinery operations in response to the disruption in West Asia.

"Despite a significant shift away from Middle Eastern crude grades, our refineries operated above 100% utilisation, LPG production was ramped up by nearly 30% within a short period, and our gas business maintained supplies to priority sectors while securing additional LNG from diversified geographies," Sahney said.

The Strait of Hormuz has been particularly important for India’s LPG supply chain. India imports about 60% of its LPG consumption, and roughly 90% of those imports have historically arrived through the strait. Before the current crisis, approximately 45% of India’s crude imports also transited the Hormuz route. The government has since said that the share of crude sourced through routes outside Hormuz has risen to around 70%.

Operational agility amid supply disruptions

IOC has responded to the disruption by diversifying crude sourcing, adjusting refinery operations and securing alternative supplies.

The company has continued to operate its refineries at high utilisation levels despite changes in the crude grades available to it. In the first quarter of FY27, IOC processed a record 19.17 million tonnes (MMT) of crude at 109.4% capacity utilisation. Its pipeline network also recorded quarterly throughput of 28.55 MMT.

The strong operational performance follows a record FY2025-26. IOC processed 75.451 MMT of crude, its highest annual throughput, at 107.4% capacity utilisation. Revenue from operations stood at ₹8,86,224 crore, while standalone net profit reached ₹36,802 crore. The company’s combined pipeline throughput was 105.556 MMT.

IOC’s annual report said the company maintained a diverse crude slate and continued to focus on refining, pipelines and marketing operations amid geopolitical and market uncertainty.

The company’s response to the LPG disruption also forms part of a wider national effort to increase domestic LPG availability. In March, the government directed refineries and petrochemical complexes to maximise LPG production by diverting propane, butane, propylene and butenes streams into the LPG pool. The measures increased domestic LPG production by about 25% at the national level at that time.

Building a larger refining base

IOC is also expanding its refining capacity as part of its longer-term strategy to strengthen domestic energy infrastructure.

Capacity additions at Panipat, Gujarat and Barauni are expected to take the company’s group refining capacity from 80.75 MTPA towards approximately 98 MTPA. IndianOil’s annual report describes these projects as providing additional capacity for future demand growth and greater integration with petrochemicals.

The expansion is intended to give IOC greater flexibility as India’s fuel demand increases while supporting a broader shift towards higher-value products and petrochemicals.

IOC is also expanding beyond conventional refining. The company has identified petrochemicals, natural gas, renewable energy, green hydrogen and sustainable aviation fuel (SAF) as important areas for diversification.

Expanding into cleaner energy

IOC is developing a large-scale green hydrogen plant at its Panipat Refinery and Petrochemical Complex as part of India’s National Green Hydrogen Mission.

The company has also commenced development of 1 GW of renewable energy capacity through its wholly owned subsidiary Terra Clean Ltd., with preparatory work under way for another 4.3 GW.

In sustainable aviation fuel, IndianOil became the first Indian company to obtain ISCC CORSIA certification for SAF production at the Panipat refinery. The company is exploring additional SAF pathways, including hydroprocessed esters and fatty acids and ethanol-to-jet technologies.

The diversification is aimed at reducing the company’s exposure to changes in the conventional transportation-fuels market while building businesses linked to India’s changing energy mix.

Why this matters

• Strengthening LPG security: Increasing domestic LPG production provides an additional buffer when imported supplies are disrupted. India remains significantly dependent on imported LPG, with about 60% of consumption met through imports.
• Reducing route dependence: Diversifying crude sourcing and increasing supplies through routes outside the Strait of Hormuz gives Indian refiners greater flexibility during geopolitical disruptions.
• Higher refinery utilisation: IOC’s 109.4% utilisation in Q1 FY27 demonstrates the company’s ability to process crude above nominal design capacity during a period of supply-chain stress.
• Long-term capacity growth: The planned expansion towards approximately 98 MTPA will provide additional refining capacity as domestic fuel demand grows.
• Energy transition: Investments in green hydrogen, renewable power and SAF indicate that IOC’s strategy extends beyond conventional oil refining into emerging energy businesses.

FAQs

Q1: Why is the Strait of Hormuz important for India’s LPG supply?

India imports about 60% of the LPG it consumes, and around 90% of those imports have historically come through the Strait of Hormuz. This makes the waterway a critical part of India’s LPG supply chain.

Q2: How much has Indian Oil increased LPG production?

IOC Chairman A. S. Sahney said the company increased LPG production by nearly 30% within a short period as it responded to disruptions in the region.

Q3: How efficiently did IOC operate its refineries in Q1 FY27?

IOC processed 19.17 MMT of crude at 109.4% capacity utilisation in the first quarter of FY27, according to reports of Sahney’s AGM address.

Q4: What was IOC’s refining performance in FY2025-26?

IOC processed a record 75.451 MMT of crude at 107.4% capacity utilisation during FY2025-26. Its standalone net profit was ₹36,802 crore, while revenue from operations was ₹8,86,224 crore.

Q5: What is IOC’s planned refining capacity?

Ongoing capacity additions at Panipat, Gujarat and Barauni are expected to take IndianOil’s group refining capacity from 80.75 MTPA towards approximately 98 MTPA.