Industry Odisha Bureau, Oct 13: Reliance is buying more Venezuelan heavy crude this month. Its complex Jamnagar refinery can process oil many rivals find difficult. Yes Securities sees a possible $3-per-barrel margin premium over state refiners.
Some crude oil is cheap for a simple reason: few refiners can handle it. For a refiner with the right equipment, that difficulty becomes an opportunity. Reliance Industries is now testing that logic again with Venezuelan heavy crude. Its Jamnagar refinery in Gujarat is among the few equipped for such grades.
Venezuelan flows return
India’s oil trade with Venezuela resumed in April after a long break. Reliance accounts for most of these shipments. Market intelligence firm Kpler projects Reliance will receive about 370,000 barrels per day in October. That would mark a seven-year high for its Venezuelan purchases. The figure remains an early estimate and could change. Kpler’s Sumit Ritolia said Venezuelan crude has regained a meaningful place in India’s import basket.
Why Merey 16 is tough
The grade in focus is Merey 16, an extra-heavy, sour crude. Its API gravity is about 15°–16°, according to S&P Global. Benchmark Brent sits at roughly 38°–39°. API gravity measures how heavy crude is compared with water. The lower the number, the denser the oil. Merey 16 also carries 2.5–3.4% sulphur, against 0.3–0.4% for Brent. That high sulphur content makes it sour and demands extra treatment. Limited demand from simpler refineries helps explain its significant discount.
Jamnagar’s complexity edge
Jamnagar scores 21.1 on the Nelson Complexity Index, according to Reliance’s website. Most refineries in India and the US score between 9.5 and 12.5. The index measures conversion capability, not profitability. A higher score generally means more ability to turn difficult crude into valuable fuels. That flexibility lets Reliance buy grades that rivals may struggle to process.
The $3 question
Yes Securities says Venezuelan crude could earn Reliance a sustainable $3-per-barrel premium. The brokerage measures this against state-run refiners such as Indian Oil Corporation. Each $1-per-barrel margin gain could add ₹4,200 crore to annualised Ebitda, it estimates. Ebitda refers to earnings before interest, taxes, depreciation and amortisation. Any actual gain will depend on discounts, costs and market conditions.
Cracks add support
Experts said fuel cracks are at an all-time high, already benefiting Reliance. A crack is the gap between a refined product’s price and the crude price. Say crude costs $80 a barrel and diesel sells for $160. The diesel crack would then be $80 a barrel. Cracks are not profits, as freight and operating costs still apply.
The Russian factor
Harshraj Aggarwal of Yes Securities said Reliance’s premium over domestic rivals had narrowed recently. As Venezuelan supplies dried up, state refiners upgraded to handle heavier crude. Discounted Russian Urals, India’s largest imported crude, levelled the field further, he added. Now Venezuelan barrels are returning and Russian discounts are narrowing. Aggarwal believes this gives Jamnagar scope to rebuild its margin lead.
Sanctions and shipping
Reliance was historically a major buyer from PDVSA, Venezuela’s state oil company. That trade faded as US sanctions bit and PDVSA’s output fell. Venezuela also lies farther away than Russia or West Asia, raising shipping costs.
Flexibility back in favour
Reliance’s real advantage lies in refining crude many competitors find hard to handle. Yet the payoff hinges on discounts, freight costs and fuel markets. For now, the opportunity is visible, but earnings have yet to confirm it.
