Indian refiners 'to wind down' Venezuelan oil buys in April

NEW DELHI • Indian refiners Reliance Industries and Nayara Energy are planning to wind down purchases of Venezuelan oil next month, fearing future US sanctions could choke off all avenues to trade with Venezuela's state-run oil firm PDVSA, three sources with knowledge of the matter said.

Such a step by Reliance, which operates the world's biggest refining complex, and Nayara - partially owned by Russian oil major Rosneft - would severely curtail purchases by one of Venezuela's last big export destinations. India accounted for about a third of Venezuela's oil shipments in January.

The move comes as US President Donald Trump warned in New Delhi last week of an increase in sanctions in a bid to oust Venezuelan President Nicolas Maduro, whose 2018 re-election was considered a sham by most Western nations.

Washington last year imposed tough sanctions on PDVSA that cut off Venezuela from the US, its biggest customer, and severely curbed trading with other major buyers of its oil, the nation's main export. Venezuela's petroleum industry has withered amid a years-long economic crisis.

After several months with little action, the White House last month added Geneva-based Rosneft Trading SA to its list of sanctioned companies over accusations that it hid the country of origin of oil cargoes loaded at Venezuelan ports and later resold in Asia. The US set a May 20 deadline for firms to wind down purchases from Rosneft.

Reliance, a long-time customer of PDVSA, has so far not placed requests for April cargoes, one of the sources said.

Nayara is planning to stop processing Venezuelan oil at its refineries after receiving two cargoes that are scheduled for loading this month, two of the sources said. It will lift no shipments of Venezuelan crude next month "since RTSA (Rosneft Trading SA) was doing all that business and no one else will pick it up", one of the sources said.

PDVSA and Reliance did not reply to requests for comment.

Nayara said it is in compliance with all relevant and applicable US sanctions. "We reaffirm our commitment to this position following the recent announcements," it said in an e-mail to Reuters. Rosneft did not immediately respond to a request for comment.

The caution over shipments comes as the US steps up its pressure campaign action against PDVSA. Reliance, an Indian conglomerate controlled by billionaire Mukesh Ambani, and Nayara have major operational and financial exposure in the US.

Currently, a small group of oil firms - including US major Chevron, Italy's Eni and Spain's Repsol - are authorised by the US Treasury Department to take Venezuelan crude as payment for overdue dividends and loans.

Reliance is about to receive about 2.9 million barrels of Venezuelan crude from Chevron and Eni, loaded in January, Refinitiv Eikon vessel tracking data and PDVSA documents showed.

But using intermediaries for sourcing Venezuelan oil may only be a short-term solution as Washington mulls over new sanctions.

US special envoy Elliott Abrams, who has accused oil and shipping firms of transferring Venezuelan oil at sea to disguise the real country of origin, told Reuters last week that firms previously authorised to maintain trade operations with PDVSA would not be allowed to do so any more.

Rosneft has harshly criticised US sanctions, saying that the oil received does not generate cash for PDVSA - the main purpose of the sanctions - but is for paying back loans.

REUTERS