Reliance Industries has agreed to purchase two million barrels of Canadian heavy crude per month, three industry sources said, as a substitute for dwindling Venezuelan supply. The deal, large for Canada, shows how global buyers are scrambling for new sources of heavy oil. Venezuela’s production has collapsed over the last several years, and US sanctions have squeezed its ability to sell oil to international buyers, including Reliance Industries.
The refiner, which operates the largest refining facility in the world, is among several companies winding down purchases from Venezuela as a result of US sanctions.
Reliance Industries’ purchases from Canada will last for six months, two sources said, while a third said it was confirmed for at least the fourth quarter.
With “Venezuela’s collapse in production, (demand) needs to be met by someone”, said a Canadian industry source, who was not authorized to speak publicly.
Bloomberg first reported the sale.
Reliance did not respond to a request for comment.
Mexico, another major producer of heavy crude, has also seen production fall, as state oil firm Pemex has been hobbled by debt.
Canada is heavily dependent on oil sales to the United States, which purchased 97 per cent of the country’s exported crude in July, the most recent Statistics Canada data available.
The Canadian oil industry has struggled for years with deep discounts for its heavy crude, due largely to congested pipelines that carry it to US refiners. This year, producers have curtailed production as the pandemic has crushed demand, which has helped elevate prices.
Canadian heavy crude for November delivery traded on Thursday for $10.80 per barrel less than the North American benchmark, according to NE2 Canada Inc.