Industry experts have shown significant skepticism regarding recent claims that US energy majors will quickly invest vast sums of dollars to fix the country's dilapidated production facilities.
Requirement of Absolute Assurances
Lacking an absolute assurance of financial backing from the Washington, analysts expect multinational oil companies to proceed with great care.
“It is premature to speculate on any potential investments,” a representative commented this weekend.
The ambitious schedule of under 18 months has been boldly proposed. However, industry projections indicate a longer timeline.
A Probable Schedule
“Chances are going to take three years for any significant output increase,” noted one energy analyst.
The analysis indicates oil companies would likely spend:
- The first year: Securing new operating agreements.
- Following phase: Commencing rebuilding of infrastructure.
- Final phase: Starting to significantly ramp up production.
The result could be an boost of around 500,000 bpd possibly by 2029.
Interest vs. Readiness for Risk
There is a important separation between companies' curiosity and their readiness to commit significantly.
“In my view their interest is an eight, on a scale of ten. But their willingness is a much lower, because there is a lack of certainty yet.”
Seasoned operators in the country share this view. The thinking is that firms will publicly talk up the opportunity while privately acting with great care.
The Vast Price Tag
The required outlay would be vast. Research analysis suggest that adding between half a million and a million barrels per day would require over $10 billion in funding over two to three years.
Yet, returning output to historical levels of around 2.5 million bpd could require a staggering $80 billion to $90 billion over six or seven years.
The Pending Issue of Government Backing
The suggestion of oil giants being reimbursed by the US taxpayer has been often floated. However, concrete details on this proposal have not yet been provided.
Without clarity is the primary impediment for the sector's reluctance. Firms seek safeguards against sovereign risk and the risk that a different president could renege on any deal.
“They must be protected from nationalization, that we’ve witnessed in Venezuela previously.”
Therefore, while rhetorical optimism runs strong, the operational realities suggest a road of slow deliberation for potential large-scale financial commitment in the Venezuelan energy industry.
