August, 2024 – Indian conglomerate Reliance Industries is set to initiate a crude-for-naphtha swap deal to resume crude oil transactions with Venezuela, following recent approval from the U.S. government. This arrangement marks a significant development in the trade between Reliance and the South American nation, which has been under sanctions.
Under the new deal, Reliance will utilize naphtha supplies as a partial payment for Venezuelan crude oil purchases, with the remainder of the payment made in dollars. This approach mirrors previous trade practices between Reliance and Venezuela’s state-owned oil company, PDVSA. The naphtha is essential for diluting Venezuela’s heavy crude oil, which will be processed at Reliance’s refineries in Gujarat, India.
Reliance, which operates a substantial 1.4 million barrels per day (mbbl/d) refining complex, had suspended direct oil purchases from Venezuela in April due to renewed U.S. sanctions. However, in July, the U.S. granted Reliance authorization to resume these transactions. The specifics of the volumes involved and the duration of this authorization have not been disclosed.
Despite potential new sanctions following a disputed Venezuelan election, U.S. officials have indicated that individual oil licenses are currently unlikely to be altered or revoked. Last year, the U.S. administration issued a broad license allowing PDVSA to export oil freely, which led to increased demand for Venezuelan oil and facilitated the country’s fuel imports through swap agreements.
However, the re-imposition of sanctions in April, in response to President Nicolás Maduro’s election-related issues, resulted in individual licenses being granted for the Venezuelan energy sector. This led to overbooked loading schedules at Venezuelan ports and delays in Reliance’s oil imports.
Asian buyers have encountered similar challenges, with Venezuelan oil production not ramping up quickly enough to meet contractual obligations, leading to delivery delays of up to 60 days. Concerns about potential withdrawal of the license prompted Reliance to limit direct loadings earlier this year, affecting vessels either in transit or at Venezuelan ports.
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