HOEC reverses HPCL B-80 sale, targets full 2026 disposal

HOEC reversed its sale of about 55,000 tonnes of B-80 crude to HPCL following a quality dispute and expects third-party sales to dispose of the complete quantity by the end of 2026. The dispute held up about Rs 260 crore of revenue and deferred drilling investment intended to increase B-80 production.

Why did HOEC reverse the HPCL crude sale?

HOEC reversed the HPCL sale after HPCL raised concerns about the presence of organic chlorides in a B-80 cargo supplied in August 2025. HOEC says the issue arose after processing of the cargo and relates to a single, one-off shipment, while discussions between the two companies remain ongoing.

The commercial consequence was a delay in about Rs 260 crore of sales revenue, according to HOEC’s second quarter of fiscal year 2027 presentation, or Q2FY27. HOEC says the held-up revenue meant investments in well-drilling plans to ramp up production had to be deferred. The presentation does not disclose a final settlement amount, allocate responsibility for the quality concern, or state that the matter has been resolved.

The disputed sale concerns B-80, an offshore block in the Mumbai High basin on India’s west coast, about 110 kilometres from Mumbai City. HOEC holds a 100% participating interest in the block, which operates under the Discovered Small Field, or DSF, revenue regime. The block-at-a-glance page reports 35.44 million barrels of oil equivalent of proved and probable, or 2P, reserves as of September 30, 2026.

How is HOEC selling the B-80 crude now?

HOEC and HPCL agreed to cancel the invoice, and HOEC has begun selling B-80 crude to third-party refiners and distributors. The company says these sales are ongoing and anticipates the complete quantity will be sold by the end of 2026, replacing the original single-buyer HPCL transaction with third-party offtake.

HOEC reported 132,275 barrels of stock held in Q2FY27. That inventory figure is disclosed in barrels, while the original HPCL cargo is described as about 55,000 tonnes, and the presentation provides no barrel-to-tonne conversion or reconciliation between the two measures. It therefore does not establish whether the Q2FY27 stock exactly represents the cancelled cargo.

Management says it is seeking an amicable, technically grounded and commercially balanced resolution with HPCL while continuing third-party sales. The presentation does not identify the third-party refiners or distributors, disclose realised prices, or quantify how much of the 132,275-barrel stock had been sold at the time of the Q2FY27 update.

What happened to B-80 production in Q2FY27?

B-80 oil production declined to an average 153 barrels per day in Q2FY27 from 270 barrels per day in Q1FY27, while average gas output declined to 1.07 million standard cubic feet per day from 1.82 million standard cubic feet per day. HOEC attributes the reduced production to high water cut on one well and plans a workover after the monsoon.

The quarter-on-quarter comparison shows average oil output fell by 117 barrels per day and gas output fell by 0.75 million standard cubic feet per day. Separately, the B-80 overview page reports Q2FY27 production of 350 barrels of oil equivalent per day, or BOEPD. The presentation does not provide a calculation reconciling that BOEPD measure with the separately reported oil and gas averages.

The production decline occurred alongside the crude-sale dispute but HOEC identifies high water cut, rather than the HPCL matter, as the reason for lower B-80 output. The distinction matters because the presentation presents the dispute as a revenue-realisation and drilling-investment issue, while it presents the affected well as the stated operational cause of lower production.

What work is HOEC planning at B-80?

HOEC targets workovers of two existing subsea wells in Q3FY27, followed by drilling of three new development wells in Q4FY27. The company says it has awarded the drilling-rig contract. Under the field development plan, or FDP, B-80 has five wells, with two already drilled and three remaining in the pipeline.

HOEC says it is undertaking fund-raising for the workover and three-well programme, with part of the raising completed. The company had previously said delayed revenue from the HPCL dispute caused drilling investment to be deferred. The presentation does not state how much funding has been raised, the timing for completion of the remaining raising, or whether third-party crude sales will fund the planned activity.

The planned development work also includes selecting an optimal infrastructure concept to put the three new wells into production and de-bottlenecking offshore facilities. HOEC further plans to reduce operating expenses by cutting diesel use for offshore equipment. These are management plans, and the presentation does not quantify expected production additions or operating-cost savings from the workovers, wells, infrastructure changes or diesel reduction.

Which facility changes could affect B-80 output?

HOEC has completed the initial phase of a compressor-modification job on its mobile offshore production unit, or MOPU, reducing suction pressure from 30 bars to 13 bars. The company lists the compressor work as a production-enhancement initiative, but does not provide a forecast for the associated change in B-80 oil, gas or BOEPD production.

The floating storage offshore vessel, FSO Prem Pride, has completed in-situ inspections and is scheduled for dry dock in Q4FY27. Together with the planned Q3FY27 well workovers and Q4FY27 drilling programme, the dry-docking schedule places several offshore activities within the same fiscal-year development timetable.

HOEC’s B-80 plans combine well intervention, new drilling, facility de-bottlenecking and equipment modifications after Q2FY27 production fell. However, the presentation gives no start-up date for the three proposed new wells, no downtime estimate for FSO Prem Pride’s dry docking, and no output target linked to the compressor pressure reduction from 30 bars to 13 bars.

Conclusion

HOEC has moved the disputed August 2025 B-80 cargo from an HPCL invoice to third-party sales, with complete disposal expected by the end of 2026. The company reports that about Rs 260 crore of revenue was held up and drilling investment was deferred, while B-80 oil production fell to 153 barrels per day in Q2FY27 from 270 barrels per day in Q1FY27 because of high water cut on one well.

The next disclosed milestones are workovers on two subsea wells in Q3FY27, drilling of three development wells in Q4FY27 and dry docking of FSO Prem Pride in Q4FY27. Investors can also watch whether HOEC completes third-party disposal by end-2026, progresses the remaining fund-raising, and reaches the commercially balanced resolution with HPCL that management has outlined.