Industry experts have shown deep doubt regarding optimistic claims that US energy majors will rapidly commit tens of billions of dollars to rebuild Venezuela's dilapidated production facilities.
Demand for Absolute Guarantees
Lacking an absolute assurance of complete repayment from the US federal government, specialists predict international firms to act with great care.
“It seems hasty to comment on any potential investments,” a representative stated this weekend.
The ambitious schedule of less than 18 months was publicly outlined. However, industry projections indicate a more cautious outlook.
A Probable Schedule
“It’s probably going to take three years for any significant production bounce,” commented one industry expert.
He suggested oil companies would likely spend:
- The first year: Securing new regulatory frameworks.
- The second year: Investing in overhaul of infrastructure.
- The third year: Reaching a position to boost output.
The result could be an increase of around 500,000 bpd perhaps by the end of the decade.
Desire Versus Appetite for Investment
Analysts draw a important separation between firms' attention and their willingness to spend substantially.
“I think their attention is an eight, on a scale of ten. But their appetite is a four or five, because there is a lack of certainty yet.”
Veteran operators in the country reinforce this sentiment. The expectation is that firms will publicly talk up the opportunity while in practice moving with deliberate slowness.
The Enormous Cost
The financial investment would be enormous. Independent analysis suggest that adding between half a million and a million barrels per day would require in excess of $10 billion in investment over two to three years.
Yet, returning production to historical levels of around 2.5 million bpd could require a massive $80 billion to $90 billion over six or seven years.
The Unanswered Issue of Government Backing
The suggestion of energy companies being compensated by the government has been repeatedly floated. However, formal assurances on such a mechanism have not yet been announced.
The absence of clarity is the primary reason behind the industry's hesitation. Firms seek protection against sovereign risk and the possibility that a subsequent administration could renege on any agreement.
“It is essential to be insured against nationalization, that we’ve experienced in Venezuela already.”
Therefore, while rhetorical confidence runs strong, the practical realities suggest a journey of extreme caution for potential significant investment in the Venezuelan energy industry.
