India voices concern over Venezuela crisis as US move reshapes oil prospects

New Delhi, Jan 4: India, on Sunday, said it is deeply concerned over the developments in Venezuela, a day after the US captured the oil-rich South American country's President Nicolas Maduro and the First Lady in a military operation.

New Delhi said it is closely monitoring the evolving situation in Venezuela and reaffirmed its support for the well-being of people of the country.

"Recent developments in Venezuela are a matter of deep concern. We are closely monitoring the evolving situation," the Ministry of External Affairs (MEA) said.

India also called for resolving the issues peacefully to ensure peace and stability in the region.

"India reaffirms its support to the well-being and safety of the people of Venezuela. We call upon all concerned to address issues peacefully through dialogue, ensuring peace and stability of the region," the MEA added in a statement.

Meanwhile, analysts and industry sources have predicted that the US-led takeover or restructuring of Venezuela's oil sector could deliver a direct benefit to India, potentially unlocking close to USD 1 billion in long-pending dues while accelerating the revival of crude production from fields it operates in the sanctions-hit Latin American nation.

India was once a major processor of Venezuelan heavy crude, importing more than 4,00,000 barrels per day at peak levels, until sweeping US sanctions and rising compliance risks forcibly shut down purchases in 2020.

Its flagship overseas producer, ONGC Videsh Ltd (OVL), jointly operates the San Cristobal oilfield in eastern Venezuela, but output has been severely curtailed as US restrictions blocked access to critical technology, equipment, and services; leaving commercially viable reserves effectively stranded.

Venezuela has failed to pay OVL USD 536 million in dividends due on its 40% stake in the field up to 2014, and a near-equivalent amount for the subsequent period for which Caracas has refused to permit audits, effectively freezing settlement of the claims.

Sanctions could be eased after a dramatic US operation removed President Nicolas Maduro and placed the country's vast oil reserves under American oversight, analysts and energy executives said.

Once sanctions are eased, OVL can move rigs and other equipment from places, such as its parent ONGC's oil fields in Gujarat, to San Cristobal to revive output that has plummeted to 5,000-10,000 barrels per day, officials in the know of the matter said.

The onshore field can produce 80,000-1,00,000 bpd with more wells and better equipment, they said, adding that San Cristobal needs rigs similar to those operating in Gujarat, and Oil and Natural Gas Corporation (ONGC) owns many such rigs.

US control of the Venezuelan oil sector also means exports to the world would start soon, and OVL can recoup its past USD 1 billion dues from San Cristobal from such revenues, they said.

In fact, OVL had sought a "specific licence" sanctions waiver, similar to one Office of the Foreign Assets Control (OFAC) had granted to Chevron to operate the oilfield and export oil from it.

OVL and other Indian firms can also take more fields in Venezuela and revive production from the Carabobo-1 Area - another Venezuelan heavy oilfield with Indian interest. OVL holds 11% interest in Carabobo-1, while Indian Oil Corporation (IOC) and Oil India Ltd (OIL) hold 3.5% stake each.

US President Donald Trump has already stated that, as part of the takeover, major US oil companies would return to Venezuela, which has the world's largest oil reserves and refurbish badly degraded oil infrastructure.

Analysts said the US cannot replace all the international companies and will need firms like OVL not just for their expertise but also for the market they bring in.

India will be a key buyer of Venezuelan crude once the Latin American country is able to restore its lost glory with help from the US and other companies.

"If sanctions are eased - as seen in past geopolitical episodes, such as Panama in 1990, when aid and trade restrictions were lifted shortly after the removal of General Manuel Noriega - trade flows can resume rapidly. Under such circumstances, Venezuelan barrels could again return to Indian refineries," said Nikhil Dubey, Senior Research Analyst at Kpler, in a post on LinkedIn.

Major Indian refiners, such as Reliance Industries, Rosneft-based Nayara Energy, IOC, HPCL-Mittal Energy and Mangalore Refinery, have the complexity needed to run these grades efficiently in blends to produce fuels like petrol and diesel.

For the oil market, the restart of Venezuelan oil flows should bring in price stability, but Trump would not like the rates to slip below USD 60 a barrel as this would make US shale oil and gas production economically unviable, another analyst said.

Venezuela holds the world's largest proven oil reserves - 303 billion barrels, which are more than 267 billion barrels of Saudi Arabia, but output has collapsed due to underinvestment, mismanagement, and sanctions.

For India, the world's third-largest oil importer, renewed Venezuelan exports would offer a strategic alternative to Middle Eastern crude, reduce exposure to geopolitical shocks, and strengthen its hand in price negotiations.

"Indian refiners are structurally configured for Venezuelan heavy crude. If production rises and payments normalise, trade can restart almost immediately," said a former oil executive.

While legal disputes and infrastructure decay pose risks, analysts argue these are manageable under a US-backed framework.

PTI