Explained: Why US control of Venezuelan oil could free $1 bn owed to India

A possible US takeover or restructuring of Venezuela's oil sector could bring an unexpected financial and strategic gain for India. The move may unlock nearly $1 billion in long-pending dues and reopening access to crude supplies cut off by sanctions more than five years ago, energy analysts told news agency PTI.

Why India has nearly $1 billion stuck in Venezuela

India's exposure to Venezuela runs deep. Until 2020, Indian refiners were among the largest buyers of Venezuelan heavy crude, importing more than 4,00,000 barrels per day at peak levels. Those flows stopped abruptly after US sanctions tightened, raising compliance risks and freezing payments linked to Indian upstream investments in the country.

At the centre of that exposure is ONGC Videsh Ltd (OVL), which holds a 40 per cent stake in the San Cristobal onshore oilfield in eastern Venezuela. While the field remains commercially viable, production has collapsed because sanctions blocked access to rigs, equipment and services needed to sustain output.

Venezuela, analysts say, has failed to pay OVL $536 million in dividends due up to 2014. A similar amount is owed for later years, but audits for that period were never cleared by Caracas, effectively freezing settlement. Together, those unpaid claims amount to close to $1 billion.

The situation could shift after a dramatic US operation removed Venezuelan President Nicolás Maduro and placed the country's oil sector under American oversight. Analysts and industry executives say a change in control could eventually lead to sanctions relief or new operating licences, allowing foreign partners to return.

How US control could unlock those dues

If restrictions are eased, officials familiar with the project say, OVL could redeploy drilling rigs from India - including from fields operated by its parent, Oil and Natural Gas Corporation - to restart activity at San Cristobal. Output, currently estimated at 5,000–10,000 barrels per day, could rise to 80,000–1,00,000 barrels per day with additional wells and modern equipment.

A revival of exports would also allow OVL to recover its unpaid dues directly from oil revenues. The company had earlier sought a special sanctions waiver, similar to the licence granted by the US Office of Foreign Assets Control to Chevron, but that request did not progress.

India's wider footprint in Venezuelan oil

Beyond San Cristobal, Indian firms also have stakes in the Carabobo-1 heavy oil block, where OVL owns 11 per cent, while Indian Oil Corporation and Oil India Ltd hold 3.5 per cent each. Venezuela's national oil company Petróleos de Venezuela SA remains the majority shareholder in both projects.

Analysts expect PdVSA to undergo restructuring under US oversight. While its stake could, in theory, be transferred to a US-backed entity, industry observers say international partners such as OVL and Spain's Repsol are likely to remain involved, given their operational experience and market access.

US President Donald Trump has said major American oil companies would return to Venezuela to repair degraded infrastructure and restore production. Analysts, however, say that Washington is unlikely to sideline all existing foreign partners.

"If sanctions are eased - as seen in past geopolitical episodes such as Panama in 1990 - trade flows can resume rapidly," said Nikhil Dubey, a senior analyst at Kpler. "Under such circumstances, Venezuelan barrels could again return to Indian refineries."

India's major refiners - including Reliance Industries, Nayara Energy, IOC, HPCL-Mittal Energy and Mangalore Refinery - are technically equipped to process heavy Venezuelan crude in blends.

Dubey said the timing also fits India's broader strategy. "India is actively diversifying its crude basket - not only to reduce dependence on Russian oil, but also amid ongoing India-US trade discussions. Venezuelan crude could offer additional flexibility and reduce supply concentration risks," he said.

Before sanctions tightened, Venezuela exported 707 million barrels a year, with India and China together accounting for more than a third of that trade. By 2025, exports had fallen to 352 million barrels, with China emerging as the dominant buyer.

For now, Kpler Risk & Compliance expects US and allied authorities to focus first on asset freezes, criminal probes and dismantling opaque trading networks rather than moving quickly to lift restrictions. China, Venezuela's main residual buyer, is also expected to wait until PdVSA's authority and payment channels become clearer.

(With inputs from PTI)