The countrys largest private oil and gas explorer, Reliance Industries, signed a 15-year oil supply contract with Venezuelas state oil company, PDVSA, in Caracas on Tuesday. Venezuelas Orinoco oil belt is expected to supply up to 400,000 barrels of crude oil per day to India to boost energy requirements of the country.
Reliance is supposed to source ultra heavy crude from the Orinoco oil belt that will also help Venezuelan state-owned petroleum company to increase production.
Companies like Reliance and Essar are processing large quantities of heavy crude or ultra heavy crude, which are 8-10% cheap and gives them distinct advantage to increase the gross refining margins, BN Bankapur, former director refinery, Indian Oil Corporation said.
Private refining companies such as Reliance Industries and Essar Oil enjoy higher refining margins of around $10/barrel owing to the higher complexity of their refineries.
Mukesh Ambani chairman Reliance Industries said in the recent AGM that the company will be sourcing eight new crudes to enhance margins for its Jamnagar refinery, which has over 1.3 million barrels per day of crude throughput.
According to reports, Venezuelan oil minister Rafael Ramirez said the South American Opec nation was currently sending 270,000 barrels per day (bpd) to Reliance under a 2008 agreement, an amount that would increase to between 300,000 bpd and 400,000 bpd.
The agreements were signed in the presence of Rafael Ramirez, Venezuelas energy minister and president of PDVSA, Reliance Team headed by PMS Prasad, executive vice president of RIL and members of Indian Embassy in Caracas, among others.
Venezuela is gaining more importance as Indian refiners are also looking at other alternative arrangements to source oil other than Iran.
Due to western sanctions imposed on Iran, Indian refineries are looking for alternative sources to import crude. For instance, Reliance Industries, the countrys biggest importer which used to import a significant quantity of crude oil from Iran until fiscal 2010, did not source any oil from the country in 2011.
India imports 83% of its crude oil requirements annually. Indias provisional crude oil import during 2011-12 stood at 172.11 million tonne. This was 5% more than the crude oil import of 163.59 million tonne in 2010-11. A total of 204.8 million tonne crude oil was processed by Indian refineries in 2011-12 against 196.5 million tonne in 2010-11.