Stabilisation of Venezuela’s oil sector could help India’s complex refineries, crude sourcing strategy in medium to long term

Venezuela has the world’s largest oil reserves, but accounts for less than 1 per cent of global production. If Trump can get Caracas to agree to his terms going forward, it could potentially make the Venezuelan oil industry sanctions-free and open for business, bringing more Venezuelan oil to the international market. Meaningfully increasing Venezuela’s oil production, however, would take years and billions of dollars in investment.

“Venezuelan crude is predominantly heavy to extra-heavy and can be processed on a sustained basis by only a handful of Indian refineries, constraining system-wide intake. Any impact is likely to be incremental and dependent on sanctions policy and the pace of production recovery,” commodity market analytics firm Kpler said in a note on Monday.

“The US intervention in Venezuela on 3 January 2026 does not materially alter India’s oil market dynamics in the near term. Still, it introduces a potential inflexion point for medium- to long-term crude supply, refining, and upstream considerations. Venezuelan crude had already been largely excluded from India’s import mix due to sanctions and logistics, and initial U.S. oversight has not disrupted existing flows. However, the change in control increases the likelihood of sanctions recalibration and a gradual reintegration of Venezuelan barrels into global markets,” it added.

Any recovery in Venezuelan oil exports would be positive for India. But Venezuelan heavy and extra-heavy crude oil grades are not suitable for all Indian refineries, and can be processed at only the most complex and advanced units. Heavy crudes are a lot more viscous, or thick, as compared to light crude grades. Heavier crudes are a lot more difficult to process than light crudes, and require complex and more capital-intensive refineries. This is one of the reasons why heavy crudes usually trade at a discount to lighter grades.

In India, private sector behemoth Reliance Industries (RIL) and Nayara Energy (NEL) have been the biggest processors of heavy crudes. Limited heavy crude volumes are also processed occasionally by a few public sector refineries like Indian Oil’s Paradip refinery and Mangalore Refinery and Petrochemicals (MRPL) unit in Mangalore. HPCL-Mittal Energy (HMEL), a joint venture of public sector refiner Hindustan Petroleum Corporation (HPCL) and Mittal Energy, also processes heavy crudes from time to time.

According to Kpler, planned investments aimed at increasing refinery complexity—such as upgrades at HPCL’s Visakhapatnam and a few other refineries—could expand India’s ability to process Venezuelan heavy crudes, gradually broadening system-wide intake capacity. Till then, any Venezuelan supply coming to India would largely support only a few Indian refineries, “constraining aggregate intake potential despite improved availability”.

India — specifically private sector refining giant Reliance Industries (RIL) — was a regular buyer of Venezuelan crude prior to the imposition of US sanctions on Caracas in 2019. Following the sanctions, oil imports from Venezuela stopped within a few months. As per India’s official trade data, Caracas was New Delhi’s fifth-largest supplier of oil in 2019, providing close to 16 million tonnes of crude to Indian refiners.

In October 2023, the US eased sanctions on Venezuela’s petroleum sector, authorising oil exports without limitation for six months. This led to RIL and a few other Indian refiners restarting oil imports from Venezuela. But imports then stopped as the sanction waiver was not extended by Washington after its understanding with Caracas on the conduct of free and fair presidential elections in Venezuela broke down. A few months later, RIL was able to restart Venezuelan oil imports after obtaining a sanctions waiver from the US. But in the summer of 2025, the company halted oil imports from Venezuela after the Trump administration threatened higher tariffs on countries buying Venezuelan crude. No Venezuelan oil has been imported into India for months now.

How the situation evolves over the next few weeks and months would be crucial from India’s perspective as well. If the US and Venezuela’s new leadership can negotiate an easing or suspension of sanctions, it could open the doors for Venezuelan oil to flow more freely in the international market, including to India.

“While Indian refiners can substitute barrels from the Middle East and the Americas, such alternatives often carry higher delivered costs and tighter economics. As a result, Venezuelan crude is expected to re-enter the market at a discount, reinforcing its attractiveness for compatible refineries. Renewed access would improve feedstock optionality, enhance procurement flexibility, and strengthen India’s negotiating leverage with other suppliers, even if total volumes remain concentrated among a few players,” Kpler said.

Experts also believe that Venezuelan crude offers India a politically acceptable diversification option amid American pressure on India’s Russian oil imports. Any increase in Venezuelan crude imports is also expected to increase India’s negotiating leverage with its traditional West Asian oil suppliers.

“Overall, the impact of Venezuela’s transition is more structural than immediate. If political stabilisation leads to sustained investment and production recovery, the outcome is broadly supportive for India’s crude sourcing flexibility, refining economics for complex assets, and upstream value realisation. However, the benefits will accrue unevenly across refiners and will remain contingent on sanctions policy, operational execution, and the pace of Venezuela’s production recovery,” Kpler said.