Janice R. Andrews
August 8, 2024, Mumbai — Reliance Industries of India is planning to execute a novel crude-for-naphtha swap agreement with Venezuela, as per many individuals acquainted with the negotiations. This action comes after the United States recently authorized Reliance to carry on oil commerce with the sanctioned country in South America.
As part of the deal, Reliance will provide refined petroleum product naphtha in exchange for some Venezuelan crude. Last month, the refiner—which runs the biggest processing complex in the world—got the go-ahead from the US to resume importing oil from Venezuela. The re-imposition of U.S. sanctions had caused Reliance to suspend direct purchases in April. However, after reapplying in May, the company was granted permission to restart operations in July.
Reliance will settle the outstanding amount of the crude purchase in US dollars as per the provisions of the agreement. Reliance’s strategic use of its refining skills and its continued partnership with PDVSA, Venezuela’s state-owned oil corporation, are reflected in the decision. In the past, Reliance has conducted comparable business with PDVSA by utilizing naphtha supply. Naphtha is needed by Venezuela to dilute its heavy crude and make it more marketable and useful.
The Gujarat-based refinery complex owned by Reliance has the capacity to handle up to 1.4 million barrels of crude oil per day. Because the refineries can handle heavier and more affordable crudes like Merey from Venezuela, this exchange agreement is very beneficial to both sides. The terms of the deal’s length and volume, however, are yet unknown.
Last year, the United States gave Venezuela’s oil industry—headed by PDVSA—a wide permission to export freely to certain markets. At first, this change in policy increased the demand for oil from Venezuela. However, the United States reimposed sanctions on Venezuela in April, concentrating on the country’s oil industry but allowing certain permits for commerce and activities in the energy sector, in response to President Nicolas Maduro’s refusal to fulfill election-related obligations.
Washington has stated that it is unlikely for specific oil licenses, including Reliance’s, to be changed or revoked at this time despite these penalties. However, the political environment is still unstable, and in the wake of Venezuela’s contentious elections, further sanctions may be applied.
According to one source, there is presently port congestion in Venezuela, which is causing delays in the transport of oil. Similar to other Asian purchasers, Reliance’s capacity to ensure on-time deliveries has been hampered by this overbooking. The nation’s oil output has found it difficult to increase rapidly enough to fulfill contractual commitments, which has led to considerable delays—up to 60 days in certain cases.
According to Kpler statistics, Reliance got 2 million barrels of Venezuelan oil in June. But the supplier’s name was not readily apparent.
Inquiries on Reliance Industries’ thoughts on the development were not answered. The refiner has positioned itself as a major participant in the global oil market despite continued sanctions and supply chain issues with a strategic move that highlights its agility in the face of evolving geopolitical and economic realities.
