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Venezuela courts India to strengthen oil ties amid US sanctions

Venezuela's oil minister is in New Delhi this week hoping to convince India's key refiners to buy more of its crude and forge closer ties as the South American nation finds itself internationally isolated after the US imposed crippling sanctions on state-owned PDVSA last month.

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Manuel Quevedo told reporters Monday that he is hoping to continue Venezuela's healthy relations with India, which has now emerged as the driver of global oil demand growth.

"We have a good relationship with India and we want to continue this relationship," Quevedo said to reporters on the sidelines of the Petrotech event in New Delhi. "[Despite current US sanctions] we will continue the trade and simply expand all the trade and relationship."

"We are selling more than 300,000 b/d to India. We want to increase that amount. India also wants to increase intake from us. We want to double that amount," the Venezuelan minister added.

Quevedo, who met with India's oil minister Dharmendra Pradhan earlier in the day, also admitted that his country's crude production -- currently at 1.57 million b/d -- has already been hampered by the sanctions.

Pradhan put out a tweet saying the two "explored possibilities for Indian investments in Venezuela's producing blocks" during the meeting with his Venezuelan counterpart.

DEMAND FROM INDIAN PRIVATE REFINERS

India's two private refiners, Reliance and Nayara Energy, are significant buyers of Venezuelan crude and shipments to both these companies are expected to rise in the coming weeks, according to industry sources.

"We will establish contacts with all buyers. We will continue our relationship with present buyers like Reliance and Nayara," Quevedo said.

Both of the refiners operate high-complexity plants in western India designed to process discounted heavy crudes, and they receive a steady flow of Venezuelan crude through their contracts.

India also has some upstream interests in Venezuela.

ONGC Videsh Ltd, the overseas arm of state-owned upstream major Oil and Natural Gas Corp, has a 40% stake in the San Cristobal oil field in Venezuela, for example.

SANCTIONS IMPACT

Despite sour political relations between the countries, Venezuela used to export around 500,000 b/d of its crude to the US.

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Since sanctions have come into place, the Latin American country is desperate to expand its list of crude buyers and forge closer ties with existing customers.

However, even refiners in Europe appear to be reluctant to buy more Venezuelan crude due to the current crisis.

On January 28, the administration of US President Donald Trump unveiled sanctions on PDVSA, which served as a de facto ban on US crude imports of Venezuelan oil and an immediate ban on US exports of diluent to Venezuela.

The new sanctions require any payment for crude from PDVSA to be deposited into blocked accounts within the US.

The funds would ultimately be transferred to a new Venezuelan government, led on an interim basis by opposition leader Juan Guaido, if and when President Nicolas Maduro relinquishes power. The US last month formally recognized Guaido as Venezuela's president.

On February 1, the US Treasury also gave non-US companies three months to wind down transactions with PDVSA that involve the US financial system, essentially prohibiting sales of PDVSA crude and products in dollars.

Sources have told S&P Global Platts that Venezuela might have to shut more than a quarter of its already reeling oil production in the coming weeks, with US sanctions preventing PDVSA from importing diluent needed to extract its extra heavy crude.

In its most recent monthly OPEC production survey, Platts estimated that the country pumped 1.16 million b/d in January.

-- Ratnajyoti Dutta, Eklavya Gupte and Sambit Mohanty, newsdesk@spglobal.com

-- Edited by James Leech, newsdesk@spglobal.com