Venezuelan state-owned oil company Petroleos de Venezuela (PDVSA) reached an agreement April 12 to ship 2 million barrels of crude oil a month to India. PDVSA has sought for some time to break its reliance on the United States as both a refiner and consumer market for Venezuelan oil. While the new deal with India is relatively small, given that Venezuela produces more than 2 million barrels of oil in a single day, it nevertheless represents a step down a sustainable path toward diversifying Caracas' oil markets.

The 2 million barrels of oil covered by agreement consists of two types of crude: 1.1 million barrels of Merey heavy crude, with the remainder comprising lighter crude known as Mesa oil. Venezuelan heavy crude is extremely thick and has high levels of sulfur, demanding additional facilities in the refining process to separate the extra compounds and create the various levels of production-grade fuels. Because of the additional cost posed by these technological hurdles, the number of refineries capable of processing this extremely viscous crude is limited. Eleven of them are located in the United States, specializing in processing extremely heavy crude imported primarily from Venezuela and Mexico. The majority of the remaining refineries able to process Venezuelan crude are in Venezuela or the Caribbean.

Because of the tensions between the Venezuelan and U.S. governments, however, PDVSA is seeking to diversify its exports partners to break its reliance on the U.S. market. But high transportation costs and the relatively great shipping distance to other potential markets has led to the United States' becoming one of PDVSA's major export partners, to the tune of 1.5 million barrels a day. To break this dependence, Venezuelan President Hugo Chavez is working to entice heavy crude investment from China and India, two nations with energy demands growing alongside their respective economies. Thus, the April 12 deal with India is just one part of a nascent multitier cooperation between the two nations in which Venezuela is helping India develop its own heavy crude fields, and India is in turn purchasing Venezuelan heavy crude and investing in the facilities necessary to refine heavy crude. Further demonstrating India's willingness to pursue the refining of heavy crude, Chevron Corp. purchased a 5 percent share in India's Reliance Petroleum on April 12 and signed a memorandum of understanding under which the two companies will operate the Jamnagar refinery, upgrading its facilities to enable heavy crude processing.

The Indo-Venezuelan cooperation could prove beneficial to both, as PDVSA will become less dependent on the United States while India will come one step closer to meeting its nation's growing energy demands. The deal reflects a practical application of the maxim "learn to walk before you run," as PDVSA continues to inch away from the United States, which ultimately could result in U.S. refineries seeing their supply shipments running away to Asia.