Indian refiners see limited gains from Venezuela as Russian oil dries up

Venezuela's heavy, acidic grades are a poor replacement for higher-quality Russian variants, which are now declining in India's crude oil basket due to US pressure

Most Indian refiners may reap little direct benefit from supplies of so-called 'dirty' Venezuelan crude oil, as a hardening of freight rates and competition for the crude from US and Chinese refiners, coupled with low production levels, limit its utility, senior officials at Indian refiners told Business Standard.

 

The only major beneficiary is likely to be Reliance Industries, they said. On Friday, Reuters also reported that RIL has been awarded a general licence by the United States to directly import Venezuelan crude. It's Jamnagar refiner is the only facility in India that has blending infrastructure capable of absorbing large volumes of dirty Venezuelan Merey oil on a sustained basis, a senior refining official from a state refiner said. 

Indian Oil’s Paradip and HMEL’s Bhatinda plant also count as complex refineries, but a lack of adequate blending infrastructure limits operations, a senior refining official said. 

However, any increase in imports of Venezuela’s heavy, acidic grades are cold comfort for the rapid depletion of higher-quality Russian varieties from India’s crude oil basket, a shift that has been accelerated by US pressure, senior industry officials said. Even at its peak in 2015 and 2016 — when Venezuela’s oil production was around 2.5 million barrels per day (bpd) — India imported only around 441,000 bpd and 415,000 bpd, respectively, according to data from maritime intelligence agency Kpler.

 

Flows of Venezuelan oil to India trickled to 167,000 bpd in 2020 before sanctions halted purchases altogether. The lifting of sanctions by the previous Biden administration in 2024 and the award of a licence to Reliance Industries to import Venezuelan oil hardly moved the needle on flows, with purchases averaging only 70,000 bpd — after Venezuelan oil production shrank to around 800,000 bpd.

 

By contrast, India imported a monthly average of 1.7 million bpd of crude oil from Russia last year, with flows declining to 1.2 million bpd this month, Kpler data showed. Russian medium, sour Urals crude is a much superior grade to Venezuela’s dirty Merey oil, which needs to be blended with lighter, higher-quality oil for use in a refinery, industry officials said.

 

Reliance accounted for 75 per cent of Venezuelan flows in 2015, 70 per cent in 2016, and 84 per cent in 2024. Rosneft-run Nayara Energy was the second-biggest buyer after Reliance, but sanctions on Nayara by the European Union bar the company from importing Venezuelan grades. Despite upgraded facilities, state-run refiners have barely upped their intake of Venezuelan oil, levelling out at 12 per cent in 2024. Reliance was the only buyer of Venezuelan oil in 2025, taking in 28,000 bpd.

 

Nonetheless, Venezuelan oil works well for RIL, said Kpler India analyst Sumit Ritolia, noting that “A stabilisation of Venezuela’s oil sector could allow limited volumes of discounted heavy crude to re-enter India’s import mix, benefiting complex refineries.”

 

Flows resume

 

Venezuelan flows have resumed this year after US President Donald Trump unseated the country’s president Nicolas Maduro and started lifting sanctions gradually on oil flows.

 

Last week, Washington passed an order offering non-US companies a “general licence to all potential buyers that are not in any sanctioned territory” to import Venezuelan oil, according to US government data. That theoretically allows Indian state-run refiners, including Indian Oil and Bharat Petroleum, to import the oil provided they do not buy sanctioned Russian oil.

 

What the order does at a more rudimentary level is to remove intermediaries like Vitol and Trafigura from the deal, which have been tasked with marketing 50 million barrels of Venezuelan oil lying in storage. These traders took margins of $1.5 per barrel, besides controlling shipping and freight rates while delivering the fuel to India, a senior Indian refining official said.

 

Venezuelan oil is currently being traded at a discount of around $15 per barrel to European benchmark Brent, a light, low-sulphur, superior crude, an industry official said. Freight rates to India average $7 per barrel, leaving only around $6-$7 per barrel for Indian refiners. Last year, Venezuelan oil on a delivered basis fetched Indian refiners a discount of around $10 per barrel on a delivered basis, the official said. Indian Customs data also shows similar numbers.

 

Widening discounts

 

However, an increase in Venezuelan flows has widened the discount to lighter grades, US officials said on earnings calls. Wider discounts on heavier crude oils, including Canadian grades, help companies like Reliance that process such crudes, a Mumbai-based analyst said. But state-run refiners like Indian Oil may not benefit because the heavier grades they buy from Iraq, such as Basrah Heavy, are of better quality and will not see much difference in rates, a company official said.

 

Also, there is not enough Venezuelan oil to supply the world. A top official from a state-run refiner told Business Standard that there is not enough Venezuelan oil to go around. “US refiners are laying first claim on the oil,” the official said.

 

Norway-based consultancy Rystad Energy reckons Venezuela would need $183 billion of investment between now and 2040 to restore crude oil production to the early 2000s’ highs of around 3 million barrels per day.

 

US independent refiner Phillips 66 said in its fourth-quarter earnings call that the return of Venezuelan barrels translates into a growing availability of heavy, high-sulphur crudes and reflects in higher margins for refiners with advanced processing facilities.

 

Company executives said additional Venezuelan barrels have helped widen discounts on heavier grades by significantly more than $1 per barrel. “Even if the Venezuelan crude doesn’t come to our refineries, (but) it hits the global market, it’s going to impact heavy crude differentials,” said Brian Mandell, executive vice president of marketing and commercial at Phillips 66, on the call.

 

Differentials for Canadian benchmark Western Canadian Select, a grade similar to Merey and processed at Jamnagar, are already some $3.50 per barrel wider this year than they were in 2025, industry data showed.