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New Delhi: The two powerful earthquakes in Venezuela not only caused massive devastation at the local level, but have also created new concerns in the global energy market. Experts believe that the possible impact on ports, shipping delays and increased insurance costs could impact crude oil imports for India and increase its cost.

On June 24, two earthquakes of magnitude 7.2 and 7.5 were recorded a few seconds apart in Venezuela. This is being described as one of the most powerful earthquakes of the last 125 years. Hundreds of people have died in this natural disaster, thousands have been injured and aftershocks are continuously being felt in the area.

Why is this development important for India?

The earthquake came at a time when India was trying to recover from oil supplies hit by tensions to Iran. After the recent peace agreement between America and Iran, it was expected that the supply of oil through the Strait of Hormuz would return to normal. However, now the disaster in Venezuela has created a new challenge for India.

Venezuela becomes important for Indian refineries

According to Kunal Khanna, Managing Director and Global Head of Natural Resources, EDME Insurance Brokers Ltd, Venezuela has emerged as an important source of crude oil for Indian refineries in recent months. He says that if the export structure there is affected then its impact can also be seen on the global energy supply.

Oil purchases had increased in April and May

Amidst the uncertain circumstances in the Middle East, India had significantly increased the import of crude oil from Venezuela during April and May. Indian refineries had preferred Venezuela as an alternative supply source, making it one of India’s major oil suppliers.

Not just oil production, there is a possibility of impact on the entire supply chain.

According to experts, the risk is not limited to oil production centers only. If power supplies are disrupted, road and transport networks are damaged or emergency restrictions are imposed at ports, ship movements may be affected for days or weeks.

Venezuela’s main cargo port La Guaira has been declared a disaster-hit area, raising further concerns about shipping and port operations.

Shipping and insurance costs likely to increase

Experts say ships may have to wait longer to load cargo. Due to change in route and delay, increase in demurrage charges is also possible. This can have a direct impact on the costs of refineries, traders and insurance companies.

Kunal Khanna says that till now insurance policies for ships coming from Venezuela mainly took into account geopolitical and sanctions risks, but now natural disasters will also have to be included as major risks.

India’s investment may also be affected

Indian government company ONGC Videsh has invested in Venezuelan oil projects. If production or exports remain affected for a long time, it may also impact India’s economic and operational interests.

High level talks were held recently

This month, there was a conversation between Prime Minister Narendra Modi and Venezuela’s acting President Delcy Rodriguez. The two leaders discussed Indian investment prospects in sectors such as mining, critical minerals, pharmaceuticals and automobiles. However, the pace of these plans is likely to be affected after the earthquake.

New risks increase with new supply chain

Experts believe that making a new country an alternative supply source does not eliminate the risk, but changes its nature. India had turned to Venezuela to reduce its dependence on the Middle East, but this natural disaster has also highlighted the risks associated with new trade routes.

Will keep an eye on the future situation

Now after the full assessment of the loss is revealed, shipping companies, energy sector businessmen and insurance companies will keep a close watch on the situation. For India, this development is being considered an indication of the risks associated with its new and important oil supply route.