Switch To Venezuelan Crude Could Cut India’s Oil Import Costs By USD 3 Bn, Says SBI Research

New Delhi, Feb 4 (KNN) India’s crude oil import bill could fall by as much as USD 3 billion a year if the country shifts part of its crude sourcing from Russia to Venezuelan heavy crude, according to a report by SBI Research. 

The report said such a move could deliver cost benefits even after factoring in higher transportation and other associated costs.

SBI Research noted that a discount of USD 10–12 per barrel on Venezuelan crude would be enough to make it economically neutral for Indian buyers compared with current sourcing patterns, reported ANI.

Pricing and Logistics Key to Viability

Venezuelan heavy crude is currently trading at around USD 51 per barrel, based on Oil Price data cited in the report. The analysis said savings would materialise only if pricing remains competitive enough to offset longer shipping distances, higher transit time and insurance costs.

Venezuela is significantly farther from India than traditional suppliers. Shipping distances are estimated to be about five times those from the Middle East and roughly double those from Russia, increasing the landed cost of crude imports.

Refining Capacity a Critical Factor

The report also highlighted the importance of India’s domestic refining capabilities. Processing heavy crude and blending different grades may involve additional technological and operational costs, which would influence the overall economics of any shift.

Using what it described as a ‘brute force scenario’ that preserves historical trends in India’s import basket, SBI Research modelled a full shift from Russian crude to Venezuelan heavy crude. Under favourable discount conditions, this could reduce the annual fuel import bill by about USD 3 billion.

Uncertainty Around Russian Discounts

However, the report cautioned that any easing of the Ukraine conflict could reduce the deep discounts currently available on Russian crude, narrowing the relative advantage of Venezuelan supplies. Even so, analysts said a discount of USD 10–12 per barrel would make sourcing decisions broadly neutral for Indian importers.

SBI added that India’s crude import strategy is likely to involve multiple combinations of Russian, Venezuelan, Middle Eastern and other grades, depending on market conditions. The final mix, it said, will be shaped by price discounts, logistics costs and refinery capabilities.

(KNN Bureau)