Indian upstream players such as Reliance Industries (RIL), Oil And Natural Gas Corporation (ONGC) and others could benefit from a US takeover of Venezuela’s oil industry. brokerages and rating firms have said.
After US captured Venezuela’s President last week, US President Donald Trump announced that the US oil companies will invest an unspecified amount to revive the oil infrastructure in the South American nation and increase its oil output, enabling higher crude flows to the US and other markets.
What did Jefferies say?
“A US takeover of Venezuela’s oil industry could mean the lifting of sanctions on Venezuelan crude sales. Reliance, which has in the past purchased ~20% of its daily crude requirement from PDVSA, could tie up supplies at a $5-8/bbl discount to Brent, aiding GRMs (gross refining margins),” Jefferies said .
Venezuelan crude is heavy, sour, and acidic, and few refineries worldwide are capable of processing it, it said.
RIL’s stock touched intraday high of Rs 1611.20 on Monday which was a record intraday high for the stock. However, the stock fell 0.94% on Monday to close at Rs 1577.45. ONGC stock lost 1.45% to end at Rs 238. BSE Oil and Gas Index was down 1.18% and the second worst performer on Monday after BSE IT Index.
Regarding ONGC, Jefferies said the former was not paid its share of dividends from production at San Cristobal, totaling more than $500million. With the US stepping in, ONGC may stand to recover these unpaid amounts. It might also be able to develop the Carabobo field in Venezuela’s Orinoco belt; ONGC has an 11% equity stake in the field, it said.
Potential impact on global oil prices
Venezuela has 18% of the world’s proven reserves of oil but currently produces less than 1% of global crude (less than 1mbpd); production is unlikely to be affected by the latest geopolitical development. Hence, any impact on global prices is likely to be minimal in the near term, Jefferies said.
Prashant Vasisht, senior vice president and co-head, Corporate Ratings, ICRA said that Venezuelan crudes are heavy and sour and therefore cheaper and accordingly any lifting of sanctions could open an avenue to purchase cheaper crude for Indian refiners, many of whom can process these types of crudes. “Lastly Indian companies have invested in oil and gas blocks in Venezuela from where dividends are stalled due to sanctions besides which development of these assets has not progressed. Accordingly, if sanctions are lifted and operations of oil industry normalize recovery of dividends and progress on the development of these blocks might be possible,” Vasisht said.
Choice Institutional Equities said Indian upstream players may benefit as the access to equipment and investments could be granted and subsequently output could be increased from the fields of San Cristobal and Carabobo-1, wherein Indian firms jointly operate with PDVSA. It said Indian refiners could benefit from import of heavier Venezuelan barrels, which are priced at a discount to Brent and enables companies to generate higher GRMs. India did import up to 400kbd of Venezuelan barrels previously,
Moreover, the heavier Venezuelan barrels could accelerate the rationing of simpler refineries globally as more complex refineries come online in India and China. It could ultimately lead to better cracks over the medium term as oil product supply balances at a faster pace, it said.
“We continue to expect Brent to average at $ 61.5/b in CY26, as we believe limited additional barrels could enter the market during the current year, resulting in limited downward pressure on oil prices. However, additional barrels from Venezuela may increase supply and weigh on prices beginning next year,” it said.
On Monday, Brent crude prices were marginally up 0.40% to $60.99 per barrel (at 6pm IST). In intraday trade, it hit a high of $61.24 per barrel and a low of $59.75 per barrel.
