RIL to swap diesel for Venezuelan crude: Update

Indian private-sector refiner Reliance Industries (RIL) will pay for Venezuelan crude via exports of diesel in a barter arrangement complying with US sanctions on the Latin American nation.

"RIL has been supplying permitted products like diesel to Venezuela and hence is able to recommence crude sourcing. These are actions compliant to US sanctions as crude sourcing against supply of permitted products is allowed," RIL said.

Although US oil sanctions imposed on Venezuela in January 2019 have no direct secondary component, oil companies such as Reliance that have a significant US presence have curtailed their commercial ties with the Opec nation, shunning direct loadings in favor of secondary market purchases through Russia's state-controlled Rosneft, which is now Venezuela's primary lifter.

The same pattern has emerged with Chinese refiners, after state-owned CNPC stopped loading Venezuelan crude in recent months. The new barter deal confirmed by Reliance suggests that the Indian company is carving out Rosneft and returning to the direct source of Venezuela's heavy sour Merey grade.

For Venezuela, the barter arrangement will help to alleviate a severe shortage of fuel caused by sanctions and the breakdown of nearly all of state-owned PdV's refining capacity.

Indian refiners RIL and Nayara Energy, which is owned by Rosneft, are the only buyers of Venezuelan crude from India. Venezuela shipped around 308,000 b/d of crude during January-August to India's ports on the west coast in Gujarat state, according to Indian customs data. RIL imported at least 116,000 b/d of crude during the period from Venezuela into its special economic zone in Jamnagar, home to the company's 704,000 b/d export-oriented refinery. It purchased the crude via Rosneft.

The balance 192,000 b/d of Venezuelan oil during January-August was delivered to Vadinar, Sikka and Mundra ports with the crude shared between RIL and Nayara. Nayara operates a 400,000 b/d refinery at Vadinar.

RIL said in March that it would cap its purchases of Venezuelan supplies, then later in the month stressed it had reduced purchases of Venezuelan crude to well below contracted levels. The company has already stopped shipping diluent naphtha to Venezuela, denying it ever has sidestepped US sanctions in supplying products to Venezuela.

Indian crude imports from Venezuela fell to 260,000 b/d in August from 420,000 b/d a year earlier. These imports averaged $53/bl in August, making it one of the lowest-priced crudes for the month. Sanctions blocked US sales of naphtha to Venezuela and cut off the US market and any purchases using US financial services.