Industry experts have voiced significant caution regarding optimistic claims that US energy majors will swiftly invest tens of billions of dollars to revive Venezuela's crumbling energy sector.
The Need for Absolute Assurances
Absent an absolute assurance of financial backing from the Washington, experts believe international firms to proceed with significant hesitation.
“It seems hasty to speculate on any potential investments,” an official stated this weekend.
The ambitious timeline of less than a year and a half has been boldly suggested. Yet, industry projections paint a longer timeline.
A Likely Timeline
“It’s probably going to take three years for any kind of output increase,” noted an industry expert.
The analysis indicates oil companies would likely spend:
- Year one: Securing new government and security contracts.
- Year two: Beginning overhaul of equipment.
- Year three: Starting to significantly ramp up production.
This suggests an boost of around 500,000 barrels per day perhaps by the end of the decade.
Appetite Compared to Appetite for Investment
Analysts draw a important separation between multinationals’ interest and their readiness to commit heavily.
“In my view their curiosity is an high score, on a scale of ten. However, their readiness is a mid-range score, because there is no clarity yet.”
Veteran operators in the region echo this sentiment. They believe that companies will publicly express enthusiasm while privately proceeding with extreme caution.
The Vast Cost
The required bill would be enormous. Research analysis suggest that increasing production by between half a million and a million barrels per day would require over $10 billion in investment over two to three years.
However, restoring production to peak levels of around 2.5 million bpd could require a massive $80 billion to $90 billion over many more years.
The Outstanding Question of Government Backing
The suggestion of energy companies being paid back by the US taxpayer has been repeatedly mentioned. But, formal assurances on such a mechanism have not yet been announced.
The absence of certainty is the primary factor behind the industry's hesitation. Operators seek protection against sovereign risk and the possibility that a subsequent government could refuse any deal.
“You need to be protected from sovereign risk, that we’ve experienced in Venezuela already.”
In summary, while political promises runs high, the practical challenges suggest a path of slow deliberation for any significant venture in the Venezuelan energy industry.
