The ongoing crisis in Venezuela, coupled with the United States' increasing control over its oil sector, could potentially unlock significant financial benefits for India, specifically to the tune of nearly $1 billion. This stems from long-pending dues owed to India's ONGC Videsh Ltd (OVL) and the prospect of reviving crude production from fields operated by the company in the Latin American nation.
Until 2020, India was a major importer of Venezuelan heavy crude, with refineries processing over 400,000 barrels per day. However, the imposition of sweeping U.S. sanctions and rising compliance risks forced a halt to these purchases. These sanctions particularly impacted ONGC Videsh Ltd (OVL), which holds a 40% stake in the San Cristobal onshore oilfield in eastern Venezuela. While the field remains commercially viable, production has plummeted due to the sanctions blocking access to essential equipment and services.
Venezuela has also allegedly failed to pay OVL $536 million in dividends due up to 2014. A similar amount is reportedly owed for subsequent years, but these audits were not cleared by Caracas, thus freezing settlement. These unpaid claims together amount to nearly $1 billion.
The situation could shift following a U.S.-led restructuring of Venezuela's oil sector. This could lead to the easing of sanctions or the granting of new operating licenses, enabling foreign partners to return. If restrictions are eased, OVL could redeploy drilling rigs from India to restart operations at San Cristobal. With additional wells and modern equipment, output could increase significantly.
Furthermore, a U.S.-directed overhaul, bringing capital, technology, and operational discipline, could substantially increase Venezuela's oil production within a year. For India, the world's third-largest oil importer, the resumption of Venezuelan exports would offer a strategic alternative to Middle Eastern crude, reduce exposure to geopolitical shocks, and strengthen its negotiating position on pricing.
However, the U.S. has also been tightening its grip on Venezuela's oil sector through sanctions aimed at pressuring President Nicolas Maduro. These actions have targeted companies and tankers involved in the Venezuelan oil trade, alleging sanctions evasion and disrupting revenue streams. The U.S. Treasury Department has stated that these measures underscore the significant risks faced by those involved in the Venezuelan oil trade.
Despite these sanctions, analysts suggest that Washington is unlikely to sideline all existing foreign partners. If sanctions are eased, trade flows could resume rapidly, allowing Venezuelan crude to return to Indian refineries. Indian refiners are technically equipped to process heavy Venezuelan crude in blends.
