Industry experts have expressed significant doubt regarding recent predictions that US large firms will rapidly pump billions of dollars to revive Venezuela's crumbling oil infrastructure.
Requirement of Solid Assurances
Absent an absolute assurance of financial backing from the American government, analysts expect international firms to move with extreme caution.
“It seems too early to speculate on any future business activities,” a representative commented recently.
The optimistic timeline of under 18 months has been publicly outlined. Yet, expert analyses paint a more cautious outlook.
A Likely Timeline
“It is likely going to take three years for any kind of output increase,” noted one energy analyst.
He suggested oil companies would likely spend:
- The first year: Securing new operating agreements.
- Year two: Investing in rebuilding of equipment.
- The third year: Reaching a position to meaningfully increase yield.
This suggests an increase of around half a million barrels per day perhaps by the end of the decade.
Desire Versus Willingness for Risk
Analysts draw a key distinction between firms' attention and their readiness to commit significantly.
“I believe their curiosity is an eight, on a range of one to 10. However, their readiness is a much lower, because there is significant uncertainty yet.”
Seasoned observers in the sector reinforce this sentiment. The expectation is that firms will publicly call it fantastic while in practice proceeding with deliberate slowness.
The Enormous Cost
The monetary outlay would be enormous. Independent analysis suggest that adding between 500,000 and a million bpd would require more than $10 billion in funding over several years.
But, returning production to historical levels of around 2.5 million barrels per day could require a staggering $80 billion to $90 billion over six or seven years.
The Pending Issue of Federal Guarantees
The suggestion of energy companies being paid back by the government has been repeatedly raised. But, specific plans on this proposal have not yet been announced.
The absence of a solid plan is the primary impediment behind the sector's caution. Companies seek safeguards against sovereign risk and the possibility that a different president could renege on any deal.
“It is essential to be protected from political change, that we’ve witnessed in Venezuela previously.”
Ultimately, while rhetorical promises runs strong, the financial realities suggest a journey of slow deliberation for any large-scale investment in the Venezuelan energy industry.
