Industry experts have voiced considerable skepticism regarding bullish statements that American large firms will swiftly commit billions of dollars to fix Venezuela's broken production facilities.
Requirement of Absolute Assurances
Without an “iron-clad guarantee” of full reimbursement from the Washington, specialists predict multinational oil companies to act with significant hesitation.
“It would be too early to discuss any future business activities,” an official said recently.
The ambitious timeframe of less than a year and a half has been boldly suggested. However, industry projections paint a different picture.
A Likely Schedule
“It is likely going to take three years for any significant production bounce,” commented one chief investment officer.
Experts believe energy firms would likely spend:
- Year one: Securing new government and security contracts.
- Year two: Investing in reconstruction of infrastructure.
- Final phase: Starting to boost production.
This would lead to an boost of around half a million bpd perhaps by 2029.
Desire Versus Appetite for Risk
Analysts draw a key distinction between firms' attention and their readiness to commit heavily.
“In my view their interest is an eight, on a scale of ten. I think their willingness is a much lower, because there is a lack of certainty yet.”
Seasoned diplomats in the region share this sentiment. They believe that firms will politically express enthusiasm while in practice acting with great care.
The Vast Investment Required
The required outlay would be vast. Independent estimates suggest that increasing production by between half a million and a million bpd would require over $10 billion in investment over several years.
But, returning output to previous levels of around 2.5 million bpd could require a staggering $80 billion to $90 billion over many more years.
The Outstanding Issue of Government Backing
The idea of oil giants being reimbursed by the US taxpayer has been often floated. Nevertheless, concrete details on this proposal have so far not been forthcoming.
This lack of clarity is the key reason behind the sector's caution. Operators seek protection against sovereign risk and the risk that a different government could refuse any agreement.
“You need to be insured against nationalization, that we’ve witnessed in Venezuela before.”
Ultimately, while rhetorical promises runs strong, the financial risks suggest a road of slow deliberation for potential large-scale venture in the Venezuelan energy industry.
