Decline in Russian Crude Oil May Welcome Venezuelan Oil to Indian Market
India’s oil minister, Hardeep Singh Puri, has expressed considerations regarding the impact of crude oil imports from Venezuela on the market. The growing concerns about reducing Russian discounts on oil and India’s reconsidering Venezuela as a crucial importer have intensified the apprehensions. The situation has raised the need for a more detailed evaluation of the market’s dynamics to assess the implications of oil imports.
“Venezuela has the largest reserves. If Venezuela comes on the market, it should have a sobering effect on all the others (market players),” Puri told press during the Global Energy Alliance for People and Planet. “And our refineries, Paradip and Reliance, have already been using Venezuelan oil,” he added.
Between 2017 and 2019, India imported an average of 300,000 barrels per day of crude oil from Venezuela before the United States imposed sanctions on the South American country. The reason behind India’s significant crude oil imports from Venezuela was the discounted pricing offered by Venezuelan producers, making it a cost-effective option for the Indian market, as reported by S&P Global.
“If the refining economics would favor Venezuelan crude in the future, Indian refiners may need to displace crude from their existing sources, which might include Middle Eastern, Latin American and US crudes,” the minister added.
According to the report, Venezuela’s oil production capacity is expected to remain unchanged for the next six months, with PDVSA, the state-run oil company, being the primary contributing factor, has “little to no investment capital and much of the oil-related infrastructure is in a poor state of repair.” Venezuela’s current capability of producing oil lies between 800,000 and 850,000 barrels per day, with actual production hovering around 750,000 barrels per day.
Over the past few years, India has taken steps to diversify its oil import sources. As a result, Russia has emerged as the top supplier of crude oil to India since February 2022. This shift in suppliers is due to Russia’s ability to supply oil at discounted prices amid Western restrictions. This has allowed India to maintain a stable supply of crude oil while keeping costs under control.
The move towards more diversified oil imports has been key to India’s energy security strategy, ensuring that the country is not overly reliant on a single supplier. However, the government aims to decrease the cost of importing oil by encouraging alternative fuels like electric mobility and biofuels in the transportation and industrial sectors.
India’s initiative of domestic production has been instrumental in driving India’s economic growth. To increase domestic oil production, the government has made exploration and production contracts more attractive and opened up vast areas for oil and gas exploration. Despite these efforts, oil imports are still rising due to stagnant domestic production and increasing demand for fuel and petroleum products.
While the use of electric vehicles and biofuel blending has increased, more measures are required to reduce the demand for petroleum. With the proper transition plan and robust transportation infrastructure, a significant reduction in fossil fuel consumption and achieving the net zero target well ahead of schedule can surface.
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