Industry experts have voiced deep skepticism regarding recent claims that US energy majors will quickly pump billions of dollars to rebuild Venezuela's crumbling energy sector.
Requirement of Solid Guarantees
Lacking an “iron-clad guarantee” of complete repayment from the Washington, analysts expect global energy giants to proceed with great care.
“It would be premature to speculate on any upcoming plans,” a spokesperson stated recently.
The ambitious timeframe of under a year and a half has been boldly proposed. However, industry projections indicate a different picture.
A Likely Outlook
“It is likely going to take three years for any kind of production bounce,” said one chief investment officer.
Experts believe operators would likely spend:
- Year one: Sorting through new government and security contracts.
- Year two: Commencing overhaul of facilities.
- The third year: Reaching a position to significantly ramp up yield.
This would lead to an increase of around 500,000 barrels per day possibly by the end of the decade.
Desire Versus Readiness for Spending
Experts make a important separation between firms' attention and their readiness to commit heavily.
“I believe their interest is an high score, on a range of ten. But their appetite is a mid-range score, because there is significant uncertainty yet.”
Veteran diplomats in the country share this view. The thinking is that majors will publicly express enthusiasm while in practice acting with great care.
The Enormous Cost
The required investment would be enormous. Research estimates suggest that adding between half a million and a million bpd would require more than $10 billion in funding over two to three years.
However, restoring production to previous levels of around 2.5 million bpd could require a monumental $80 billion to $90 billion over many more years.
The Pending Question of Government Backing
The prospect of energy companies being reimbursed by the US taxpayer has been repeatedly floated. However, concrete details on this proposal have so far not been forthcoming.
Without certainty is the main factor for the industry's hesitation. Operators seek protection against nationalization and the risk that a different president could cancel any promise.
“It is essential to be insured against sovereign risk, that we’ve experienced in Venezuela already.”
In summary, while rhetorical confidence runs strong, the financial risks suggest a road of measured steps for any significant investment in the Venezuelan oil sector.
