US Sanctions Help Venezuelan Oil Find Its Way into Indian Market

New Delhi: Venezuela's oil exports have tapered off and shifted towards India since the new US sanctions began on January 28 as state-run oil company PDVSA seeking to replace deliveries to the United States and Europe that were disrupted by payment restrictions.

The South American nation is turning its focus to cash-paying buyers, especially in India, its second-largest customer after the United States, amid US sanctions designed to undercut financial support for Venezuelan President Nicolas Maduro. Sanctions are designed to bar Maduro's access to oil revenue that has helped his government remain in power.

In the two weeks since the sanctions were announced, PDVSA has been able to load and export 1.15 million barrels per day (bpd) of crude and refined products, according to Refinitiv Eikon data. Venezuela was exporting about 1.4 million bpd in the months before sanctions, according to the Eikon data.

Two supertankers, Baghdad and Folegandros I, launched late on Monday from Venezuela's Jose terminal carrying cargoes to Indian ports.

Barclays bank addressed the issue in a special report on Venezuela, issued on February 12.

"Considering all the difficulties that Venezuela faces in delivering oil to other markets and the legal, reputational and financial risks confronting traders or counterparties that do business with it under the current conditions," the bank wrote, "it seems unlikely that all production can, in short order, go to other markets."

US bank Goldman Sachs said in a note on Wednesday that because of the sanctions there was "limited ability for non-US refiners to take on Venezuela's very heavy crude" beyond India and China.

Before the sanctions, PDVSA shipped over 500,000 bpd to the United States, its largest cash market, followed by India and China, at above and below 300,000 bpd respectively.

Venezuela has sent its oil minister, Manuel Quevedo, to India to convince refiners, including Reliance Industries Ltd and Nayara Energy Ltd, to double their oil purchases.

"We are selling more than 300,000" bpd to Indian buyers, Quevedo said on Monday in New Delhi. "We want to double that amount."

Reliance is among PDVSA's main cash-paying customers, while Nayara receives Venezuelan oil from one of its largest stakeholders, Russian oil giant Rosneft. The latter supplies PDVSA oil to Vadinar, India's second largest refinery, under a Rosneft payment for the loan program which dates back to 2014.

Rosneft should be able to continue to receive PDVSA cargoes under its oil-for-loans, according to a reading of US sanctions by lawyers and traders. Nayara receives around half of Venezuelan crude supplied to Rosneft, with the remainder shipped to Europe, including Rosneft operations in Germany.

According to a trading source close both to Rosneft and PDVSA crude operations, the last cargo containing fuel oil for the Russian company left Venezuela for Asia on Jan. 30-31, containing around 1 million barrels.

"PDVSA supplies to Rosneft or its subsidiaries in India under deals clinched before the sanctions are not falling under the sanctions," said Natalia Abtseshko, head of international projects group at Moscow law firm Vegas Lex.