A stabilisation of Venezuela’s oil sector could allow limited volumes of discounted heavy crude to return to India’s import basket, though the gains would mainly be for a few refiners, largely in the private sector.
According to commodity market analytics firm Kpler, Venezuelan crude is mostly heavy to extra-heavy and can be processed by only a small number of Indian refineries. These include Reliance Industries’ Jamnagar complex and Nayara Energy’s Vadinar refinery, both designed to handle high-sulphur, heavy crude. If Venezuelan crude supplies to India resume, Reliance could increase purchases. However, Nayara’s Vadinar refinery may not be able to do so due to sanctions-related constraints.
Among state-owned refiners, only limited volumes of Venezuelan crude have been processed in the past, mainly at IOC’s Paradip refinery, MRPL, and HMEL. Most public-sector refineries are not equipped to run these grades at scale.
“Venezuelan heavy and extra-heavy grades are not universally suitable across Indian refineries…Limited volumes have also been processed intermittently at IOC’s Paradip refinery, MRPL, and HMEL, but not all public-sector refineries currently have the configuration or operational flexibility to run this acidic (High TAN) and extra-heavy Venezuelan grades at scale,” said Sumit Ritolia, lead research analyst, refining & modeling at Kpler.
As per the Kpler data, Indian imports of Venezuelan crude were strong between 2013 and 2016, rising from about 400 kbd to nearly 500 kbd. Reliance’s Jamnagar refinery was the biggest buyer during this period, followed by Nayara’s Vadinar refinery (then Essar Oil), while New Mangalore Refinery imported smaller volumes. Imports began to fall after 2017, peaked at around 540 kbd in 2018, and dropped to zero by 2021 after U.S. sanctions were imposed.
Venezuela holds the world’s largest proven oil reserves, estimated at about 303 billion barrels, yet its crude oil production is only around 1 million barrels per day, accounting for roughly 0.8% of global output.
Sumit Ritolia is of the view that overall, the impact of any recovery in Venezuela’s oil sector will be gradual and uneven, depending on sanctions, operational conditions, and production recovery.
Prashant Vasisht, Senior Vice President and Co-Group Head, Corporate Ratings, ICRA, said Venezuelan crude is heavy and sour, which makes it cheaper. Indian companies have invested in Venezuelan oil and gas blocks, but dividend payments and development have remained stalled due to sanctions.
“Lastly Indian companies have invested in oil and gas blocks in Venezuela from where dividends are stalled due to sanctions besides which development of these assets has not progressed,” he added.