Venezuela’s oil exports to India, its third largest crude buyer, experienced a sharp decline in the first half of 2018, according to data from state oil company PDVSA, raising supply concerns for Indian refiners as they are increasingly pressed to find additional oil sources for substitution.
Venezuelan oil output descends to a 30-year low and export continues to slip as a result of mismanagement, inadequate investment and overdue payment delays. The dilemma where the OPEC member lies is unfavorable to almost all of its customers.
But India would suffer considerably from the current situation as the nation’s refiners are now preparing to drastically reduce oil imports from Iran to zero, in compliance with U.S. sanctions on Tehran.
During the first half of 2018, Venezuela’s shipments of heavy crude to India came in at around 280,000 barrels per day (bpd), a 21 percent decrease from the 355,500 bpd level recorded in the same period of 2017, according to trade data from PDVSA.
The decline is second only to that the United States has suffered. The world’s biggest economy has seen a sharp fall of about 30 percent in oil imports from Venezuela year to date.
If India cannot secure expected crude supplies from its two major oil suppliers Iran and Venezuela in coming months, some refiners would have no other choice but to import the heavy crude they need almost entirely from Iraq, analysts said.
“Indian refiners are very worried about supply from Iran, but also from Venezuela,” said Robert Campbell, head of oil products research at consultancy Energy Aspects.
Saudi Arabia is expected to raise supply to India in a short time, but those additions would not match the lost crude from Venezuela, he added.
India currently has the world’s fourth largest refining capability following the United States, China and Russia.
Slumping Oil Production in Venezuela
Venezuela’s oil industry is collapsing at a faster-than-expected pace in the wake of the nation’s worsening economic condition.
In the first five months of 2018, the country’s oil output was fixed at average of 1.58 million bpd, the lowest level over the recent 30 years, according data from OPEC. While putting pressure on global supply and pushing continuous rise in oil prices, the slump has also weighed on crude exports.
In June, PDVSA sent 268,300 bpd of crude to India after servicing some vessels that had undergone a month-long wait in the port for loading. The oil firm plans to deliver barrels down to about 240,000 bpd in next month, according to PDVSA data.
Venezuela’s collapsing oil production, while resulting in unstable crude supply to India, has largely benefited Iraq, the largest crude exporter to India, and United Arab Emirates, the latter overtaking Venezuela as India’s fourth biggest oil supplier in May.