Reliance Industries, India’s largest refiner, has resumed crude oil imports from Venezuela, utilizing a naphtha-for-crude swap arrangement. This strategic move comes after the company secured a U.S. license last month to re-engage in oil trade with the sanctioned South American nation.
Under the terms of the deal, Reliance will supply naphtha, a refined petroleum product, to Venezuela as partial payment for the crude oil it imports. Naphtha is crucial for Venezuela, as it is used to dilute the country’s heavy crude, making it easier to transport and refine. The remainder of the payment for the crude will be made in U.S. dollars.
Reliance operates the world’s largest refining complex in Jamnagar, Gujarat, with a capacity to process approximately 1.4 million barrels of crude oil daily. The complexity of Reliance’s refineries allows the company to process cheaper, heavier crude types, such as Venezuela’s Merey blend. This makes the deal particularly beneficial for Reliance, as it can secure lower-cost crude while providing Venezuela with much-needed naphtha.
This arrangement mirrors previous trades between Reliance and Venezuela’s state-owned oil company, PDVSA. However, the company has exercised caution due to the volatile political climate in Venezuela and the potential for renewed U.S. sanctions. Despite these sanctions, the U.S. has allowed certain companies, including Reliance, to continue limited trade with Venezuela under specific licenses.
The crude-for-naphtha swap arrangement is expected to enhance Reliance’s operational efficiency and cost-effectiveness in crude oil processing. However, challenges remain. Loading schedules at Venezuelan ports have been overbooked, leading to significant delays in oil shipments to Reliance and other Asian buyers. Some of these delays have extended up to 60 days, disrupting the supply chain. Reliance last received a shipment of 2 million barrels of Venezuelan crude in June, according to reliable sources. The resumption of this supply chain is crucial for the company, as any further delays could impact its refining operations. Additionally, there is uncertainty regarding the future of the U.S. license, which could be withdrawn at any time due to geopolitical developments.
