Energy analysts have shown significant doubt regarding recent claims that American oil giants will rapidly invest vast sums of dollars to fix Venezuela's dilapidated energy sector.
Requirement of Iron-Clad Guarantees
Absent an absolute assurance of financial backing from the Washington, experts believe global energy giants to proceed with extreme caution.
“It would be premature to discuss any upcoming plans,” a spokesperson commented in response.
The aggressive timeframe of under a year and a half was publicly proposed. Yet, realistic assessments indicate a longer timeline.
A More Realistic Schedule
“It is likely going to take multiple years for any kind of recovery in production,” noted one industry expert.
Experts believe oil companies would likely spend:
- The first year: Sorting through new government and security contracts.
- Following phase: Commencing overhaul of equipment.
- Year three: Starting to boost output.
The result could be an increase of around half a million bpd perhaps by 2029.
Interest vs. Appetite for Risk
There is a critical difference between companies' curiosity and their appetite to invest substantially.
“I think their interest is an high score, on a scale of ten. However, their appetite is a mid-range score, because there is a lack of certainty yet.”
Seasoned operators in the sector reinforce this caution. The expectation is that majors will politically call it fantastic while actually proceeding with extreme caution.
The Colossal Price Tag
The monetary outlay would be enormous. Research projections suggest that increasing production by between 500,000 and a million barrels per day would require over $10 billion in funding over two to three years.
However, rebuilding production to peak levels of around 2.5 million barrels per day could require a monumental $80 billion to $90 billion over six or seven years.
The Outstanding Question of Government Backing
The prospect of energy companies being reimbursed by the US taxpayer has been repeatedly floated. However, specific plans on this proposal have so far not been provided.
Without certainty is the main factor for the industry's caution. Firms seek protection against nationalization and the risk that a subsequent government could renege on any agreement.
“It is essential to be insured against political change, that we’ve witnessed in Venezuela previously.”
Ultimately, while political optimism runs strong, the operational risks suggest a journey of extreme caution for potential large-scale investment in the Venezuelan oil sector.
