Indian Companies Shift to Venezuelan Crude Amid Russian Oil Cuts

In a significant shift in oil sourcing, Bharat Petroleum Corporation Limited and Hindustan Petroleum Corporation Limited are increasingly turning to Venezuelan crude. This comes in the wake of India's ongoing reduction in purchases of Russian oil. The move reflects changing dynamics in the global oil market and India's evolving energy strategies.

The Ministry of External Affairs in India has indicated a willingness to explore various crude oil supply options, including from Venezuela. As per official sources, Indian refiners had previously imported Venezuelan oil until sanctions were imposed in 2020. However, purchases resumed in the 2023-24 period, albeit at a lower volume, constituting around 1-2% of India’s total oil imports.

Venezuela holds the largest proven oil reserves globally but has faced significant production challenges. Current estimates indicate a production level of approximately 0.88 million barrels per day (MMbpd), a stark drop from 2.5 MMbpd in 2010 due to sanctions and a lack of investment in the sector. Furthermore, Indian companies face challenges in managing the high viscosity and acid content of Venezuelan crude, which could complicate refinery processes unless blended with lighter crudes.

Industry experts, such as Sanjay Khanna, Chairman and Managing Director of Bharat Petroleum, have noted that while Venezuelan crude could offer a substantial supply, its high metal and nitrogen content necessitates blending with lighter crudes for viable processing. This process adds complexity to operations and may increase costs. As mentioned by Amit Priyadarshan, Chief Executive Officer of Caliche, adjustments to refinery systems are possible but not immediate, making the transition intricate.

Reliance Industries, India's refining giant, has reportedly secured a shipment of Venezuelan crude oil, highlighting the growing interest among Indian firms. The Foreign Ministry has confirmed that public sector entities in the oil and gas sector maintain established ties with Venezuela's state-owned oil company, PDVSA.

Additionally, analysts suggest that if India can secure Venezuelan crude at discounted prices, it could potentially reduce the national fuel import bill by up to $3 billion. Nonetheless, this is contingent on factors such as domestic refining capacity and high associated shipping costs, which could inflate expenses significantly when compared to sourcing oil from the Middle East or Russia.

In summary, as India navigates a complex energy landscape marked by geopolitical factors and supply chain challenges, the pivot towards Venezuelan crude could reshape the country's oil import dynamics in the coming years.