Venezuela Impact: Why Next 18 Months Are Critical For India?

After Venezuelan President Nicolas Maduro's ouster from the South American nation, and the US President Donald Trump's growing emphasis on bolstering Venezuela's oil production, Ex-Secretary, MoCI, Dr Ajay Dua, delved into what this signified for India's oil marketing companies (OMCs), challenges to boost oil production, whilst weighing in on the petrodollar debate. 

Venezuelan Oil Production Surge: What's The Timeline?

The most optimistic estimate is it will take "18 months to ramp up from one million to one and a half million barrels a day and at the cost of seven billion dollars", according to the former MoCI secretary.

"If one looks at the history of the oil industry in Venezuela, it was way back in the 90s that it was able to produce as much as three and a half million barrels a day, which has gradually come down first in President Chavez's term and then in President Maduro's era, to under one million dollars a day," Dua said

"So to get it back to one, and this is about 0.8% of the world trade in oil, is going to be a time consuming affair as well as expensive," he said.

"The estimate is that even if the US oil industries get interested and there is no certainty that they will jump at it, because if you recall, Axiom Mobile and Philip Conoco, which are the two very large oil explorers and oil refiners in the US, they had burnt their hands in Venezuela in the 90s," he noted.

Key Hurdles To Ramp Up Venezuelan Oil Production

The main challenges for upping the ante when it comes to exploring over 1% of Venezuelan Oil reserves are "political stability in that country as well as law and order stability".

"If that does not come about or there is apprehension of it, no investor, whether it is a European or a US will like to put its money there, he said.

"Second, as of now, the US sanctions which were imposed way back in 2020, earlier in 2017, then reimposed in 2020, those still stand on the oil industry. Thereafter, the investors will have to renegotiate their contracts for selling as well as for engaging ships," he added.

Will America's Oil Ambitions In Venezuela Impact India's OMCs?

India does import some amount of oil, but 90% of the oil currently produced by Venezuela goes all the way to China and most of the remaining goes to the United States because of the characteristics of the oil.

The crude oil which is produced by Venezuelan companies is sour and that sour oil is useful in producing diesel. And in the US, there are refineries on the Gulf Coast which have been designed to use Venezuelan oil. So, this oil will in all likelihood flow more to the US whether there is a disruption in supply to China or even if it is not, the additionall availability will be brought up by the US refiners rather than it coming more to India.

"So the point I am just trying to make is India is not likely to be affected very much," Dua said.

Meanwhile, Indian oil entities from ONGC to Oil India have vested interested in ongoing Venezuelan oil projects.

Indian oil companies have invested some amount of money and they don't compete now. "Yes, they do have a share in one or two projects actually in Venezuela but all of them like I mentioned earlier because of lack of pipelines and the infrastructure itself not adequate investment taking place are affected," he said.

"India is trying to set off some of that assets by buying oil from Venezuela, selling it in the high seas, sometimes getting it to India if it's not able to sell it but the exposure is limited. Our companies have invested much more in say for instance in Russia in the Siberian oil fields," Dua noted.

Also Read: After Maduro’s Capture, Why Oil Markets Are Refusing to Panic?

Did Trump's Petrodollar Concerns Trigger US Intervention in Venezuela?

"I am not sure whether Mr. Trump is as worried about maintaining the, saying that the transactions worldwide should be only in dollars. He is actually more worried about propagating his own hegemony, hegemony of the US over the Latin American countries." he said.

"In 1823, it was dubbed the Monroe Doctrine to prevent the European domination of Latin America saying America will follow the Monroe Doctrine. Now Mr. Trump himself two days ago, he says this is no longer Monroe, it is Donro Doctrine," he said.

What is the ‘Donroe Doctrine’?

This is linked to the idea of the world getting shared between China, US and Russia. So the purpose of this deal could be, "purpose of this invasion, capture, whatever you call it, could well be, please let me deal with Latin America. I will let you do what you like in Taiwan till China and similarly the message to the US to Soviet Russia."