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Despite crisis, Venezuela and India to up investment in energy sector

08 August 2014
Financial Express

Despite the ongoing crisis in Venezuela, New Delhi and Caracas are continuing their joint investments in the energy sector. Venezuela’s PDVSA and ONGC have agreed to further invest in the San Cristobal joint venture (JV) over the next few years to increase production. In 2016, the two companies had signed a contract to increase production in the Orinoco Oil Belt worth $318 million and this year the first high pressure water pump was inaugurated. Diplomatic sources told FE that India continues to be one of the largest buyers of Venezuelan crude. Over, 400,000 bpd continues to be procured by Indian companies. “In view of the large and growing refining capacity in India, firms such as IOCL (for their refinery in Paradip) are ready to procure crude from Venezuela. This would be a possibility in future when production of Venezuelan crude increases,” one of sources said. “The other oil JV in Venezuela with participation of Indian firms (OVL, IOCL and Oil India) is expected to do better as infrastructure in the area develops and the economic situation in Venezuela improves,” the source said.

Talking to FE over the ongoing post-election crisis in Venezuela, Prof Karin Costa Vazquez, director, Centre for African, Latin American and Caribbean Studies, OP Jindal Global University, said: “It is unlikely that India will support or criticise President Nicolás Maduro’s efforts to rewrite the constitution. India and Venezuela maintain friendly relations. In the past, India has refrained from commenting on domestic affairs of other countries that do not directly affect its own geopolitical and economic interests.”

“In case of the US sanctions on Venezuela, we cannot expect substantive change in India’s stance. An eventual US pressure on India to comply with the sanctions may reduce India’s engagement with Venezuela but not completely ban or even lead to any major reduction in oil exports,” said Vazquez. As US sanctions reduce Venezuela’s oil revenue, they can actually work in favour of India by leveraging the country’s negotiation position with Venezuela, she pointed out.

Responding to a question, Augusto Montiel, the ambassador of Venezuela to India told FE: “Through the legally constituted National Constituent Assembly (NCA), the framework for a more efficient and dynamic climate of direct foreign investment can be consolidated. The number of persons that voted for peace and stability in the NCA in the election can only benefit the India-Venezuela bilateral relationship. There have already been great advances in oil cooperation between Venezuela’s PDVSA and Indian companies.” “The internal stability the NCA will bring to the country is beneficial for India, as Venezuela continues to be a safe and stable provider of oil and other products.”