Industry experts have shown significant caution regarding recent predictions that American energy majors will quickly invest vast sums of dollars to fix Venezuela's broken energy sector.
The Need for Iron-Clad Assurances
Absent an absolute assurance of full reimbursement from the US federal government, specialists predict global energy giants to act with great care.
“It would be too early to comment on any future business activities,” an official stated recently.
The ambitious timeline of less than a year and a half has been boldly suggested. Nevertheless, expert analyses indicate a longer timeline.
A Likely Outlook
“Chances are going to take 36 months for any significant production bounce,” noted one industry expert.
He suggested operators would likely spend:
- The first year: Navigating new operating agreements.
- The second year: Commencing overhaul of facilities.
- Final phase: Reaching a position to significantly ramp up output.
This would lead to an boost of around 500,000 bpd maybe by the end of the decade.
Interest vs. Readiness for Spending
There is a important separation between firms' attention and their appetite to invest heavily.
“I believe their curiosity is an high score, on a scale of ten. I think their appetite is a mid-range score, because there is a lack of certainty yet.”
Seasoned operators in the region reinforce this sentiment. The expectation is that majors will publicly talk up the opportunity while in practice proceeding with great care.
The Enormous Investment Required
The monetary investment would be enormous. Independent estimates suggest that adding between 500,000 and a million barrels per day would require in excess of $10 billion in investment over several years.
However, rebuilding production to historical levels of around 2.5 million bpd could require a monumental $80 billion to $90 billion over six or seven years.
The Unanswered Question of Taxpayer Funding
The idea of oil giants being compensated by the US taxpayer has been repeatedly mentioned. But, formal assurances on any guarantee have not yet been announced.
The absence of certainty is the main factor behind the industry's caution. Companies seek protection against sovereign risk and the possibility that a future administration could cancel any agreement.
“They must be insured against political change, that we’ve seen in Venezuela before.”
Ultimately, while political promises runs high, the practical challenges suggest a road of slow deliberation for any major venture in the Venezuelan oil sector.
