Against the backdrop of global energy realignments, India's oil and gas strategy is in a decisive phase, balancing near-term energy security with long-term transition priorities. This is shaped by disrupted crude trade flows, refining expansion, and the growing role of gas and low-carbon fuels, alongside steady growth in city gas consumption and progress in biofuels, green hydrogen, and renewables.

Venezuelan Crude: A Potential New Destination

India may become a realistic destination for Venezuelan crude as global trade patterns shift. China has been the main buyer, but this may not hold in 2026. With potential easing of U.S. sanctions and the U.S. showing interest in processing more Venezuelan barrels, the discounts that made these crudes attractive to price-sensitive Chinese "teapot" refineries are likely to narrow. Once Venezuelan crude prices closer to fair value, teapot refineries will be far less interested, though some barrels may still go to China for loan-repayment reasons.

The Indian refining system has a history of processing Venezuelan grades and faces no technical barrier if availability improves and the economics work. However, actual shifts in flow depend on several factors: Venezuela's production levels, how much crude the U.S. decides to take, China's loan-repayment obligations, and the sanctions landscape. If Venezuelan production returns to pre-blockage levels, S&P Global estimates India could import between 100,000 and 150,000 barrels per day (bpd), assuming U.S. consumption of 500,000-550,000 bpd and Chinese obligations of around 80,000 bpd.

For India's state-owned Oil & Natural Gas Corporation (ONGC), the volume potential from Venezuela is small. ONGC's reported production from Venezuela in the 2024-2025 financial year was 1,870 bpd from San Cristobal and 970 bpd from Carabobo-1, accounting for less than 1% of its international output. These volumes do not merit the creation of an 'equity-oil trade corridor' where ONGC's share of production is shipped back to India.

India's Oil Demand and Shifting Imports

India's oil demand growth remains in focus amid refining capacity expansion, petrochemical buildout, and downstream products demand growth. Crude imports from Russia have declined significantly, from 1.6-1.8 million bpd in the first half of 2025 to around 1 million bpd currently. Private refineries like Reliance are largely staying away from Russian crude, while public sector undertaking (PSU) refineries seem to be on a gradual return. The shortfall in Russian crude is being largely met with Middle Eastern grades and opportunistic U.S. flows.

Natural Gas Market Dynamics

Progress toward India's target of 15% gas in its energy mix by 2030 (currently around 6%) has seen limited headway. Growth largely stagnated in 2025 due to favorable weather muting summer power demand and, consequently, gas-based peak electricity demand. Industrial gas consumers remained price-sensitive, hurting demand prospects amidst market volatilities.

Indian buyers grappled with a complex market characterized by volatility between various pricing benchmarks. A weakness in oil prices and strong U.S. domestic gas prices due to local demand and weather factors are redrawing the pricing equation for price-sensitive LNG importers in India. The city gas sector remains the main driver for gas demand growth, now accounting for 23% of overall demand. In the past five years, India has almost trebled the number of compressed natural gas (CNG) stations and doubled domestic piped natural gas (PNG) connections.

Power Generation Capacity

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