Energy analysts have voiced significant caution regarding optimistic predictions that US oil giants will quickly pump vast sums of dollars to revive the country's dilapidated production facilities.
Requirement of Absolute Guarantees
Lacking an absolute assurance of financial backing from the Washington, experts believe global energy giants to act with significant hesitation.
“It is hasty to speculate on any future business activities,” a representative commented in response.
The ambitious schedule of less than a year and a half has been boldly outlined. However, realistic assessments paint a more cautious outlook.
A More Realistic Schedule
“It is likely going to take 36 months for any kind of recovery in production,” noted an chief investment officer.
He suggested oil companies would likely spend:
- Year one: Sorting through new government and security contracts.
- Following phase: Commencing overhaul of facilities.
- Year three: Being able to meaningfully increase yield.
The result could be an rise of around half a million barrels per day possibly by the end of the decade.
Desire Versus Readiness for Investment
There is a critical difference between multinationals’ interest and their appetite to invest significantly.
“I think their attention is an eight, on a scale of ten. I think their willingness is a four or five, because there is significant uncertainty yet.”
Veteran observers in the country share this sentiment. They believe that companies will publicly express enthusiasm while in practice moving with deliberate slowness.
The Colossal Price Tag
The required outlay would be enormous. University projections suggest that adding between half a million and a million bpd would require more than $10 billion in investment over several years.
However, restoring output to peak levels of around 2.5 million bpd could require a massive $80 billion to $90 billion over six or seven years.
The Pending Issue of Taxpayer Funding
The prospect of firms being reimbursed by the US taxpayer has been repeatedly mentioned. But, formal assurances on such a mechanism have not yet been forthcoming.
The absence of a solid plan is the key factor for the industry's hesitation. Companies seek guarantees against nationalization and the possibility that a subsequent government could renege on any deal.
“It is essential to be insured against sovereign risk, that we’ve experienced in Venezuela before.”
In summary, while rhetorical confidence runs high, the financial risks suggest a road of extreme caution for any major investment in the Venezuelan energy industry.
