How US takeover of Venezuelan oil could benefit Reliance, ONGC
What's the story
Leading Indian companies Reliance Industries and Oil and Natural Gas Corporation (ONGC) are likely to be major beneficiaries of a possible US-led takeover and restructuring of Venezuela's oil sector. According to Jefferies, an investment banking firm, both companies could gain in terms of supplies, cash flows, and valuations if sanctions on Caracas are eased or lifted.
Reserve details
Venezuela's oil reserves and production levels
Venezuela has around 18% of the world's proven oil reserves but contributes less than 1% to global crude supply, with output below one million barrels per day. This means that the recent geopolitical developments surrounding a possible US takeover of Venezuelan oil assets are unlikely to significantly affect crude prices in the near future, even if trade flows change.
Investment impact
US investment could reshape supply dynamics
Jefferies expects American oil companies to invest heavily in Venezuelan fields once sanctions are lifted. This could increase production through 2027-28 and possibly put downward pressure on crude prices unless OPEC+ makes offsetting cuts. For Reliance, the key opportunity lies in access to heavily discounted Venezuelan crude that its Jamnagar complex can technically process.
Partnership prospects
Reliance's past and potential future ties with Venezuela
Reliance had partnered with PDVSA in 2012 to source nearly 20% of its daily crude needs from Venezuela. However, the deal was called off after US sanctions tightened in 2019. Now, with Washington indicating it would sell Venezuelan crude to global buyers, Jefferies believes Reliance could again secure long-term volumes at a discount. This would support gross refining margins and cash generation for the company.
Dividend recovery
ONGC's potential gains from US-led restructuring
For ONGC, Jefferies highlights a more direct balance sheet catalyst: recovery of long-pending dividends from its Venezuela ventures. The company has not received its share of dividends from production at the San Cristobal field, with unpaid dues now estimated at over $500 million. If a US-led restructuring allows cash repatriation, ONGC could recover this amount and also revive development of the Carabobo asset in the Orinoco Belt.
Stock outlook
Jefferies maintains 'Buy' ratings on Reliance and ONGC
Jefferies maintains 'Buy' ratings on both Reliance and ONGC, with target prices of ₹1,785 and ₹310, respectively. This indicates a 12% upside for Reliance and a 28% upside for ONGC from their last close. However, the firm has flagged key risks such as weaker-than-expected refining and petrochemical margins or higher cash burn in Reliance's new energy and e-commerce ventures.