Market specialists have expressed deep skepticism regarding recent predictions that US energy majors will quickly invest vast sums of dollars to revive Venezuela's dilapidated energy sector.
The Need for Absolute Guarantees
Absent an solid promise of full reimbursement from the Washington, analysts expect international firms to move with extreme caution.
“It would be too early to comment on any future business activities,” a representative stated in response.
The ambitious schedule of less than 18 months has been boldly proposed. Yet, realistic assessments suggest a longer timeline.
A Probable Schedule
“It is likely going to take three years for any significant production bounce,” said one energy analyst.
Experts believe oil companies would likely spend:
- The first year: Sorting through new government and security contracts.
- The second year: Investing in reconstruction of equipment.
- Final phase: Reaching a position to significantly ramp up output.
This would lead to an increase of around half a million barrels per day perhaps by the end of the decade.
Appetite Compared to Willingness for Investment
Analysts draw a key distinction between multinationals’ interest and their readiness to commit substantially.
“In my view their attention is an high score, on a scale of one to 10. I think their appetite is a mid-range score, because there is no clarity yet.”
Experienced observers in the sector reinforce this view. The expectation is that majors will politically talk up the opportunity while in practice moving with deliberate slowness.
The Enormous Cost
The required investment would be colossal. Research analysis suggest that adding between half a million and a million bpd would require over $10 billion in funding over several years.
However, rebuilding output to peak levels of around 2.5 million barrels per day could require a staggering $80 billion to $90 billion over six or seven years.
The Outstanding Issue of Federal Guarantees
The suggestion of oil giants being reimbursed by the US taxpayer has been often floated. But, formal assurances on this proposal have not yet been provided.
Without a solid plan is the key impediment for the industry's caution. Firms seek protection against nationalization and the possibility that a subsequent government could cancel any promise.
“It is essential to be shielded from nationalization, that we’ve witnessed in Venezuela previously.”
Ultimately, while political promises runs strong, the operational realities suggest a road of slow deliberation for potential significant venture in the country's oil sector.
