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India's crude oil import bill could decline by up to USD 3 billion annually if the country shifts a portion of its crude sourcing from Russia to Venezuelan heavy crude, according to a new report by State Bank of India (SBI) Research.
The report highlighted that reducing reliance on Russian crude and increasing purchases of Venezuelan heavy crude could yield significant cost benefits, even after accounting for logistics and other factors. It noted that a discount of USD 10-12 per barrel on Venezuelan crude would be sufficient to make the choice economically neutral for Indian importers. SBI said "India's fuel import bill could even decline by USD 3bn in the event of shifting to Venezuela...discount of USD 10-12 could make the choice agnostic". The report states this benefit would materialise if the Venezuelan crude were priced competitively enough to offset any additional transportation and handling costs. At present, Venezuelan heavy crude is trading at about USD 51 per barrel, according to Oil Price data cited in the SBI report. The analysis in the report also pointed out that the cost of shifting from Russian crude to Venezuelan heavy crude depends on several variables, including the level of discount vis-a-vis Brent crude, longer shipping distances, and time and insurance costs. Venezuela is geographically farther, with shipping distances roughly five times those from the Middle East and about twice those from Russia for India, adding to the total landed cost of crude imports. The report also emphasised the role of India's domestic refining capacity to process heavy crude and any technological costs that might be involved in blending different grades. SBI research used a "brute force scenario" that preserved historical trends in India's import basket to model the impact of a full shift from Russian crude to Venezuelan crude, concluding that this could lower the annual fuel import bill by approximately USD 3 billion under favourable discount conditions. However, the analysts caution that any easing of hostilities in Ukraine could reduce the current deep discount that Russian crude enjoys, potentially narrowing the economic advantage of Venezuelan barrels. Still, they maintain that a discount in the range of USD 10-12 per barrel could make the switch between suppliers economically neutral or agnostic for Indian buyers. The SBI report stated that the transition matrix for India's crude import mix will involve multiple combinations, reflecting varied scenarios where different proportions of Russian, Venezuelan, Middle Eastern and other crude grades are blended based on market conditions. The analysis reinforces that while the shift to Venezuelan heavy crude could offer substantial savings, the final import strategy will likely be shaped by discount levels, logistical costs and refinery capabilities. (ANI)
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