Industry experts have shown significant skepticism regarding recent predictions that US energy majors will quickly pump tens of billions of dollars to fix the country's broken oil infrastructure.
Requirement of Absolute Guarantees
Absent an solid promise of complete repayment from the US federal government, specialists predict global energy giants to act with extreme caution.
“It would be hasty to speculate on any potential investments,” a representative stated in response.
The optimistic timeline of less than 18 months was boldly suggested. Yet, realistic assessments indicate a more cautious outlook.
A More Realistic Schedule
“It is likely going to take multiple years for any significant output increase,” noted one energy analyst.
He suggested energy firms would likely spend:
- Initial phase: Sorting through new operating agreements.
- Following phase: Commencing rebuilding of facilities.
- Year three: Reaching a position to significantly ramp up yield.
This would lead to an increase of around 500,000 barrels per day maybe by the end of the decade.
Interest vs. Readiness for Investment
There is a important separation between firms' attention and their willingness to spend significantly.
“In my view their curiosity is an high score, on a scale of ten. But their appetite is a four or five, because there is significant uncertainty yet.”
Veteran operators in the country reinforce this view. The expectation is that companies will politically talk up the opportunity while actually proceeding with deliberate slowness.
The Enormous Investment Required
The financial bill would be enormous. Research analysis suggest that increasing production by between 500,000 and a million bpd would require more than $10 billion in funding over two to three years.
But, restoring production to historical levels of around 2.5 million bpd could require a staggering $80 billion to $90 billion over many more years.
The Unanswered Issue of Taxpayer Funding
The prospect of oil giants being paid back by the government has been repeatedly raised. However, concrete details on any guarantee have not yet been provided.
This lack of certainty is the primary impediment behind the sector's hesitation. Firms seek guarantees against political risk and the risk that a future president could renege on any agreement.
“It is essential to be insured against sovereign risk, that we’ve experienced in Venezuela previously.”
Ultimately, while political promises runs high, the financial risks suggest a road of extreme caution for any large-scale venture in the Venezuelan energy industry.
