Industry experts have voiced considerable doubt regarding recent claims that US energy majors will quickly invest billions of dollars to fix Venezuela's dilapidated production facilities.
Requirement of Absolute Guarantees
Without an absolute assurance of full reimbursement from the Washington, analysts expect global energy giants to proceed with extreme caution.
“It would be premature to discuss any upcoming plans,” a representative commented in response.
The aggressive schedule of less than a year and a half has been publicly suggested. Yet, expert analyses paint a different picture.
A More Realistic Schedule
“It’s probably going to take 36 months for any kind of production bounce,” noted one industry expert.
Experts believe energy firms would likely spend:
- The first year: Navigating new operating agreements.
- Year two: Investing in overhaul of facilities.
- Final phase: Reaching a position to significantly ramp up production.
This suggests an increase of around half a million barrels per day possibly by 2029.
Appetite Compared to Appetite for Spending
There is a critical difference between firms' attention and their willingness to spend significantly.
“I think their interest is an high score, on a scale of ten. But their appetite is a mid-range score, because there is no clarity yet.”
Veteran observers in the region reinforce this caution. The thinking is that majors will publicly express enthusiasm while actually acting with great care.
The Colossal Investment Required
The financial bill would be colossal. University analysis suggest that adding between 500,000 and a million barrels per day would require in excess of $10 billion in funding over several years.
But, returning output to peak levels of around 2.5 million bpd could require a staggering $80 billion to $90 billion over many more years.
The Outstanding Question of Federal Guarantees
The idea of oil giants being reimbursed by the US taxpayer has been often floated. However, concrete details on such a mechanism have so far not been announced.
The absence of clarity is the primary impediment for the sector's caution. Firms seek safeguards against sovereign risk and the chance that a subsequent president could cancel any promise.
“You need to be shielded from political change, that we’ve experienced in Venezuela before.”
Therefore, while rhetorical optimism runs strong, the practical realities suggest a road of extreme caution for potential major venture in the Venezuelan energy industry.
