New Delhi: India’s refiners are looking at Venezuelan crude, not because it can replace Russian Ural crude overnight, but as a “supplementary supplier” that gives refiners bargaining leverage in the current geopolitical scenario, market experts told ThePrint.
“Venezuelan crude coming into the market gives Indian refineries a leverage to increase its bargaining power,” said Sumit Ritolia, the lead analyst for refining and modelling at global trade intelligence firm Kpler.
Ritolia underlined that Venezuelan oil will grow only “at the margin” and remain a “supplementary supplier”.
In February, Reliance Industries (RIL) reportedly secured a deal to import overall two million barrels of Venezuelan crude. The deal is for a cumulative supply of 2 million barrels, and not on a per day basis.
State-run refiners—Indian Oil Corporation Ltd (IOC) and Hindustan Petroleum Corporation Ltd (HPCL)—reportedly have also made a purchase of 2 million barrels each of Venezuelan oil from trading firm Trafigura for their refineries in Paradip and Visakhapatnam, respectively, says according to Argus Media, an independent provider of global energy and commodity market intelligence in a response to queries from ThePrint.
Indian refiners are actively hunting for alternatives as discounted Russian oil becomes harder to depend on, post the US and Europe sanctions on Russia and the recent announcement by US President Donald Trump that India would stop purchasing crude oil from Russia.
India, however, has maintained that any oil purchases from Russia will continue if the global market dynamics support it, while remaining open to exploring commercial opportunities with Venezuela.
‘Venezuelan crude coming into market gives Indian refineries leverage to increase bargaining power,’ says Sumit Ritolia, the lead analyst at Kpler.
Venezuelan barrels, analysts say, offer India a fresh lever in a market where every discount counts.
“This is a good leverage again for Indian refiners,” Ritolia said, pointing out that Venezuelan crude can help refiners “secure some barrels economics that are being lost in diversifying away from Russian barrels”.
Venezuela might seem like a perfect option as it has the world’s largest proven oil reserves of around 303 billion barrels, but Venezuelan crude is difficult to refine due to its characteristics.
Venezuelan crude, especially the popular Merey grade, is classified as extra-heavy and highly sour.
“Venezuelan crude is very heavy and sour, meaning very few refiners globally can process it,” Prashant Vasisht, Senior Vice-President and Co-Group head (corporate ratings) at ICRA Limited told ThePrint earlier this month.
On the other hand, Russian Urals is classified as a medium-heavy, sour crude. That means it has some sulphur, but it is still relatively easy to process. Most Indian refineries can refine Urals without major trouble.
However, Ritolia stressed that Venezuela oil is not a new source for India. “India used to process Venezuelan crude at length around 2017, 2018, 2019,” he said, adding that even until “last year, Reliance and some other public sector refiners were processing Venezuelan crude.”
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Limited production & refining capacity
While Venezuela’s return is positive, it comes with hard limits. Its production is only around 900,000 barrels per day, meaning it does not have the volume to replace Russia or the Middle East in India’s crude basket.
‘Venezuelan crude is very heavy and sour, meaning very few refiners globally can process it,’ says Prashant Vasisht, Senior Vice-President, ICRA Limited.
According to Argus Media, Venezuela’s oil infrastructure would take years—and possibly hundreds of billions of dollars—to return to something close to its former capacity of roughly 3 million barrels per day, even under the best investment conditions.
Meanwhile, India’s crude oil imports from the Middle East alone are expected to touch nearly 3 million barrels per day (mbpd), while Russia is likely to remain around 1.1-1.2 mbpd, said Ritolia.
Given the vast difference in volumes, Ritolia noted that “India cannot directly flip from whatever they were buying from Russian barrels to Venezuelan barrels.”
Another hindrance is India’s limited refinery capacity for Venezuelan oil. According to Ritolia, even if Venezuelan oil production rises, Indian refiners are not currently equipped to handle large volumes of heavy and highly acidic crude.
“In a hypothetical scenario, even if Venezuela can produce that many barrels, Indian refiners are not that equipped because as mentioned, it’s one of the most difficult, heavy and highly acidic crude,” Ritolia said.
Venezuela crude not yet cheap
According to SBI Research of February, if Venezuela offers crude at a discount of $10–$12 per barrel, India’s annual fuel import bill could fall by around $3 billion.
But current market pricing suggests Venezuelan crude is not as cheap as Russia’s—at least for now.
Ritolia said Venezuelan crude landing cost (total price paid to bring it from the seller to the refinery) is around ICE Brent minus $5 to $6, while Russian crude discounts are still around $9 to $10. That makes Venezuelan crude “a bit costlier compared to Russian crude at the moment”.
He also pointed out that crude shipments from the American or Venezuelan coast typically take 30 to 45 days to reach India, far longer than the 7–8 days required for Middle Eastern supplies. As a result, he said freight costs are “two to three times more than what refiners buy from Middle Eastern crude.”
Vasisht of ICRA made a similar point, noting that transporting crude from the US Gulf Coast or Venezuela to India can cost “about $2.5 going up to $3.5 and sometimes $4” per barrel, whereas freight for Middle Eastern crude is significantly lower at “about 40 cents per barrel,” rising to “70 cents per barrel.”
Finally, market experts underlines that Venezuela is not replacing Russia or the Middle East oil, instead, it is emerging as a backup source—useful for India’s most advanced refiners when other supply routes face disruptions.
(Edited by Ajeet Tiwari)