Cheap Venezuelan crude could add up to Rs 12,600 crore to RIL’s EBITDA. What investors should know

The return of heavy Venezuelan barrels, combined with narrowing discounts on Russian Urals, could help Reliance Industries (RIL) rebuild its refining margin premium over domestic peers and add as much as Rs 12,600 crore to annual operating profit, according to YES Securities.

The brokerage estimates that higher Venezuelan crude intake and full optimisation of Jamnagar’s complex could add $2-3 a barrel to Reliance’s blended gross refining margin. On annual crude throughput of about 70 million tonnes, that translates into an estimated Rs 8,400 crore-Rs 12,600 crore increase in annual O2C EBITDA.

YES Securities has retained its buy rating on Reliance and set a target price of Rs 1,660, implying potential upside of 41.9% from the Rs 1,170 price at the time of its report.


The opportunity, however, is subject to regulatory licensing, the sustainability of Venezuelan supplies and the discount at which the crude can be delivered to India.

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Why Venezuelan crude matters

Reliance’s historical refining advantage was built on three factors: access to discounted Venezuelan heavy crude, Jamnagar’s deep conversion capability and integrated captive logistics.

The refinery was designed to process difficult, extra-heavy grades such as Venezuelan Merey-16, which has an API gravity of about 16 degrees and contains high levels of sulphur, acidity and metals.

Such crude typically trades at a discount to benchmark Brent because it requires complex processing. But not every refinery can economically process it.

Jamnagar’s delayed coking units, high-pressure hydrocrackers and petcoke gasification complex allow Reliance to convert heavy, high-metal barrels into higher-value middle distillates while limiting low-value fuel oil output.

That gives the refinery a feedstock cost advantage over less complex plants.

The brokerage estimates that Venezuelan crude previously contributed around $1.30 a barrel of benefit through its heavy feedstock discount. A further $1.30 a barrel came from Jamnagar’s superior yield configuration and ability to avoid residual black oil production.

Venezuelan flows return

Reliance’s Venezuelan crude advantage weakened after US sanctions disrupted supplies.

The company had historically processed around 300,000-400,000 barrels per day of Venezuelan Merey-16. But Venezuelan volumes fell to negligible levels between 2021 and 2023 after sanctions on PDVSA forced Reliance to replace the feedstock with alternative sour grades, including Russian Urals.

The flow of Venezuelan crude began to recover in 2024 and 2025 after temporary and individual trading authorisations reopened some channels.

YES Securities estimates that Indian imports of Venezuelan crude have rebounded to around 250,000-465,000 barrels per day, while Reliance’s intake in 2026 so far has risen to about 250,000-420,000 barrels per day.

The refinery is sourcing the cargoes primarily through licensed international trading houses.

The re-entry of these heavily discounted Orinoco barrels could restore part of Reliance’s raw material cost advantage, the brokerage said. But the ultimate benefit will depend on whether the flows remain sustainable, the landed discount to Brent and the continuity of regulatory licences.

RIL’s margin premium could widen

Reliance’s reported gross refining margin outperformed those of domestic PSU refiners by a wide margin between financial years 2012 and 2018.

Its premium over the average of Indian PSU refiners ranged from around $3.08 a barrel in FY18 to as much as $7.10 a barrel in FY15. The advantage narrowed after Venezuelan sanctions, the widespread availability of discounted Russian crude and changes in fuel taxation.

In FY23, Reliance’s margin premium temporarily inverted against some coastal PSU refiners. The brokerage argues that this did not represent a permanent loss of Jamnagar’s competitive advantage.

Instead, it reflected a change in feedstock availability and market conditions.

As Russian crude discounts narrow, Reliance’s ability to process discounted Venezuelan heavy crude could restore a structural margin buffer. YES Securities models a sustainable GRM premium of around $3 a barrel over domestic PSU refiners.

That would still be below the peak premium achieved during the earlier Venezuelan crude cycle, but would represent a meaningful improvement from the period of margin compression.

Jamnagar’s hardware advantage

The Venezuelan crude opportunity is not based only on the price of the feedstock. Jamnagar’s configuration allows Reliance to process grades that can impose a yield penalty on less complex refineries. Its delayed coking units convert heavy residual oil into lighter products, while its petcoke gasification complex produces syngas for plant utilities and hydrogen generation.

That allows the refinery to substitute lower-cost syngas for expensive imported merchant liquefied natural gas. The combination of feedstock flexibility, high conversion intensity, captive logistics and gasification creates operating leverage when heavy crude is available at a sufficient discount.

YES Securities estimates that every $1 a barrel expansion in Reliance’s blended GRM could generate about Rs 4,200 crore of annualised EBITDA. A $2-3 a barrel improvement would therefore have a direct and material impact on O2C earnings and free cash flow generation.

What could derail the opportunity?

The key risk is that Venezuelan crude flows may not be permanent. Trading remains subject to regulatory permissions and licensing conditions. Any disruption could force Reliance to substitute other sour or heavy grades, reducing the feedstock arbitrage.

The economics will also depend on the delivered discount. If Venezuelan crude becomes less attractive relative to other heavy grades, the benefit to Reliance’s margins will narrow.

The brokerage also cautioned that the margin advantage depends on the refinery operating at full complex optimisation, with Venezuelan crude accounting for around 25%-35% of the overall crude slate.

A sustained improvement in margins will therefore require both the availability of the crude and the ability to maintain high utilisation of Jamnagar’s conversion and gasification assets.

What it means for investors

The Venezuelan crude opportunity gives Reliance an additional earnings lever at a time when the company’s stock has been under pressure. RIL shares are down around 8% in the past month. YES Securities nevertheless retains a buy rating, arguing that the return of discounted heavy crude could help rebuild the company’s margin premium.

The potential benefit also comes on top of Reliance’s broader businesses, including retail, telecom and digital services, and new energy investments.

For investors, the immediate question is not simply whether Venezuelan crude has returned to India. It is whether Reliance can convert that access into a sustainable refining premium.

If the flows remain authorised, discounts stay attractive and Jamnagar operates at full conversion efficiency, the impact could be significant: higher gross refining margins, stronger O2C EBITDA and better free cash flow generation.

(Disclaimer: This article has been written by Nikhil Agarwal, who is not a SEBI-registered Research Analyst or an Investment Adviser. Nikhil Agarwal and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here)