Venezuelan crude flows to public sector refiners via third parties

Venezuela was the 9th largest source of crude for India in Q1 FY25

While public sector refiners await a sanction waiver from the United States to purchase crude from Venezuela, they have already begun engaging in “second-order transactions” to source it from companies that already hold the waiver, according to sources at the Ministry of Petroleum and Natural Gas.

India has refrained from directly purchasing crude oil from a sanctioned country, but it is permitted to acquire cargoes from a third party.

In July, media reports said Reliance Industries Limited (RIL) has secured an official clearance from the US authorities to import oil from the South American country.

However, sources said the company has begun to purchase Venezuelan crude only recently, hinting that Indian refiners were sourcing cargoes from other global sellers.

Trade department figures show Venezuela was the 9th largest source of crude oil for India in the first quarter (April-June) of FY25, accounting for $626 million of shipments.

In FY24, it was the 16th largest source of imports, sending $802 million worth of crude oil.

On a monthly basis, oil imports from the country began in December 2023, after a long pause. It hit a high of $383 million in March 2024. 

Public sector refiners are currently banking on ONGC Videsh Limited (OVL), receiving a waiver from the US State Department and Office of Foreign Assets Control to receive a license exempting it from sanctions and allowing it to work in Venezuela using the US dollar.

The overseas arm of domestic state-owned exploration and production company ONGC, currently has $600 million dividends from local assets stuck in the country.

OVL acquired a 40 per cent stake in the San Cristobal Field in Venezuela in 2008, with Venezuelan state-owned PDVSA holding the remaining stake.

Once and if OVL secures the waiver, state-run refiners will easily get it from them," a well-placed source said.

He stressed that Indian appetite for Venezuelan crude, considered "dirty" or lower grade crude, remains limited.

Only a few refineries in India can process the different grades of Venezuelan crude, which are typically heavy, viscose and have a high sulphur content. It is rarely used on a standalone basis, and mostly used blended," he said.

State-run IOCL's Paradip refinery in Odisha is one such facility, and may have received a few cargoes of the oil, industry sources said.

However, Indian refiners are keen to purchase Venezuelan crude owing to the discounts, which have been 'significant' in the past few years given the country's need to gain access to foreign currency, sources said.

In August 2024, the price of Merey crude oil – Venezuela’s reference export blend – averaged $62.15 per barrel, down $67.61 per barrel in the previous month.

The US had imposed sanctions on Venezuela's oil sector in 2018, after the Nicolás Maduro regime returned to power.

These sanctions were eased in October 2023, but were re-imposed in April, this year. However, the US State Department made an exception for US companies to operate in Venezuela.