US control of Venezuelan oil may unlock $1 bn stuck dues for India, lift output

A US-led takeover or restructuring of Venezuela’s oil sector could deliver a direct benefit to India, potentially unlocking close to USD 1 billion in long-pending dues while accelerating the revival of crude production from fields it operates in the sanctions-hit Latin American nation, analysts and industry sources said.

India was once a major processor of Venezuelan heavy crude, importing more than 4,00,000 barrels per day at peak levels, until sweeping US sanctions and rising compliance risks forcibly shut down purchases in 2020.

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Its flagship overseas producer, ONGC Videsh Ltd (OVL), jointly operates the San Cristobal oilfield in eastern Venezuela, but output has been severely curtailed as US restrictions blocked access to critical technology, equipment, and services – leaving commercially viable reserves effectively stranded.

Venezuela has failed to pay OVL USD 536 million in dividends due on its 40% stake in the field up to 2014, and a near-equivalent amount for the subsequent period for which Caracas has refused to permit audits, effectively freezing settlement of the claims.

Sanctions could be eased after a dramatic US operation removed President Nicolas Maduro and placed the country’s vast oil reserves under American oversight, analysts and energy executives said.

Once sanctions are eased, OVL can move rigs and other equipment from places, such as its parent ONGC’s oil fields in Gujarat, to San Cristobal to revive output that has plummeted to 5,000-10,000 barrels per day, officials in the know of the matter said.

The onshore field can produce 80,000-1,00,000 bpd with more wells and better equipment, they said, adding that San Cristobal needs rigs similar to those operating in Gujarat, and Oil and Natural Gas Corporation (ONGC) owns many such rigs.

US control of the Venezuelan oil sector also means exports to the world would start soon, and OVL can recoup its past USD 1 billion dues from San Cristobal from such revenues, they said.

In fact, OVL had sought a ’specific licence’ sanctions waiver, similar to one Office of the Foreign Assets Control (OFAC) had granted to Chevron to operate the oilfield and export oil from it.

OVL and other Indian firms can also take more fields in Venezuela and revive production from the Carabobo-1 Area – another Venezuelan heavy oilfield with Indian interest. OVL holds 11% interest in Carabobo-1, while Indian Oil Corporation (IOC) and Oil India Ltd (OIL) hold 3.5% stake each.

Venezuelan national oil company Petroleos de Venezuela SA (PdVSA) is the majority stakeholder in both San Cristobal and Carabobo-1.

Post the US action, PdVSA may undergo restructuring, analysts said. In the worst-case scenario, its stake can be taken over by a US company or any new entity that Washington may erect.

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OVL and other international companies – Repsol of Spain has 11 per cent stake in Carabobo-1 – are most certainly likely to continue in the projects with their holdings, analysts said.

US President Donald Trump has already stated that, as part of the takeover, major US oil companies would return to Venezuela, which has the world’s largest oil reserves, and refurbish badly degraded oil infrastructure.

Analysts said the US cannot replace all the international companies and will need firms like OVL not just for their expertise but also for the market they bring in.

India will be a key buyer of Venezuelan crude once the Latin American country is able to restore its lost glory with help from the US and other companies.

"If sanctions are eased – as seen in past geopolitical episodes, such as Panama in 1990, when aid and trade restrictions were lifted shortly after the removal of General Manuel Noriega – trade flows can resume rapidly. Under such circumstances, Venezuelan barrels could again return to Indian refineries,” said Nikhil Dubey, Senior Research Analyst at Kpler, in a post on LinkedIn.

Major Indian refiners, such as Reliance Industries, Rosneft-based Nayara Energy, IOC, HPCL-Mittal Energy and Mangalore Refinery, have the complexity needed to run these grades efficiently in blends to produce fuels like petrol and diesel.

"India is actively diversifying its crude basket – not only to reduce its dependence on Russian oil, but also amid ongoing India-US trade discussions, where lowering exposure to Russian barrels remains a key theme. In that context, if sanctions on Venezuela are eased, Venezuelan crude could offer additional flexibility to Indian refiners and help ease supply concentration risks,” Dubey said.

Before 2019, Venezuela exported 707 million barrels of crude oil a year, with the US absorbing about 32% and China and India 35%. have declined to 352 million barrels a year, with China taking 45% and unknown others 31%.

Kpler Risk & Compliance expects US and allied authorities to prioritise asset freezes, criminal investigations, and the dismantling of evasive trading networks rather than immediately easing restrictions.

China, Venezuela’s primary residual buyer, is likely to pause lifting until PdVSA authority and payment channels are clarified in the near term.

Explaining the US move, analysts said Trump is trying to decouple the American economy from the rest of the world. With Venezuelan oil under its belt, the US will no longer be dependent on OPEC producers like Saudi Arabia and the UAE.

"In a way, Trump has sent a strong message to Saudi Arabia. His logic of having discovered Venezuelan oil and so being its true owner, also holds good for the Middle East. After all, it was US firms which discovered oil in Saudi Arabia and other places, and as a corollary, it can also capture Saudi crown prince Mohammed bin Salman Al Saud,” an analyst tracking the sector said.

With its own oil and gas production and Venezuelan output, the US will no longer be dependent on any other part of the world for its energy needs.

Its dependence on China, however, continues for non-energy items, but Trump is trying to cut even that through his tariffs and encouraging local production, he said.

For the oil market, the restart of Venezuelan oil flows should bring in price stability, but Trump would not like the rates to slip below USD 60 a barrel as this would make US shale oil and gas production economically unviable, another analyst said.

"The best case for him will be to ask OPEC to lower its production to accommodate Venezuelan flows into the market.” Venezuela holds the world’s largest proven oil reserves – 303 billion barrels, which are more than 267 billion barrels of Saudi Arabia, but output has collapsed due to underinvestment, mismanagement, and sanctions.

A US-directed overhaul – bringing capital, technology, and operational discipline – could lift production significantly within a year, adding supply to global markets, analysts say.

For India, the world’s third-largest oil importer, renewed Venezuelan exports would offer a strategic alternative to Middle Eastern crude, reduce exposure to geopolitical shocks, and strengthen its hand in price negotiations.

"Indian refiners are structurally configured for Venezuelan heavy crude,” said a former oil executive.

"If production rises and payments normalise, trade can restart almost immediately.” Geopolitically, a US-dominated oil sector in Venezuela would also dilute China’s leverage, which currently enjoys priority access to Venezuelan crude through debt-repayment deals. Any renegotiation of those arrangements could open space for India to regain long-term supply contracts.

While legal disputes and infrastructure decay pose risks, analysts argue these are manageable under a US-backed framework.