Reliance Industries Ltd, operator of the world's largest refining complex, has indicated a potential return to purchasing Venezuelan crude oil. This move is contingent upon sales being explicitly permitted to companies based outside the United States.
Awaiting Regulatory Green Light
The Indian conglomerate stated it is currently awaiting regulatory clarity before making a final decision. "We await clarity on access for Venezuelan oil by non-US buyers and will consider buying the oil in a compliant manner," a Reliance spokesperson told Reuters. Industry sources further revealed that state-controlled refiners Indian Oil Corp (IOC) and Hindustan Petroleum Corp (HPCL) are also prepared to consider Venezuelan oil under the same conditions.
Reliance halted its purchases of Venezuelan crude in March last year. This decision followed an announcement by then-US President Donald Trump imposing a 25% tariff on nations buying oil from Venezuela. The company's last cargo from the South American nation was received in May 2023.
A Shift in the Geopolitical Landscape
The landscape shifted after an agreement between Caracas and Washington, following events in early January. This pact allows for the export of up to $2 billion worth of Venezuelan crude, estimated at 30 to 50 million barrels, to the United States.
Reliance's massive refining operations in Jamnagar, Gujarat, with a combined capacity of approximately 1.4 million barrels per day, are specifically configured to process heavier and cheaper crude grades. Venezuela's Merey oil is a perfect fit for this configuration.
Sumit Ritola, lead research analyst for refining and modelling at Kpler, noted that if Venezuelan barrels re-enter global markets, they are likely to be sold at a discount. "This would improve feedstock optionality and economics for compatible refiners, even if volumes remain limited," he explained to Reuters.
Venezuelan Oil as a Strategic Alternative for India
Historical data from LSEG trade flows shows several Indian refiners have imported Venezuelan oil in the past. These include HPCL-Mittal Energy, Nayara Energy, Indian Oil Corp, and Mangalore Refinery and Petrochemicals.
Ritola pointed out that Venezuelan crude could serve as a "politically acceptable diversification option" for India as it reassesses its energy sourcing strategy. This search for alternatives comes amid growing pressure from Western nations on India to reduce its purchases of Russian oil following Moscow's invasion of Ukraine. The US has alleged that oil revenues support Russia's war effort, doubling tariffs on some Indian goods to 50% last year as a punitive measure.
In a related development, legislation was cleared earlier this week intended to further "punish" countries continuing business with Russia. While some state-run refiners and Nayara Energy are expected to continue importing Russian crude, Reliance has stated it will not take any Russian oil in January 2024. This step could drive India's overall intake of Russian crude for the month to its lowest level in years.
"We've already seen that Reliance has reduced its intake of Russian crude, which indicates refiners are willing and able to adapt when compliance or trade risks rise," Ritola observed, highlighting the dynamic nature of global energy trade in response to geopolitical pressures.
