Energy analysts have shown deep caution regarding bullish statements that American large firms will quickly invest billions of dollars to revive the country's crumbling production facilities.
Demand for Solid Assurances
Lacking an solid promise of full reimbursement from the US federal government, analysts expect international firms to act with significant hesitation.
“It seems premature to comment on any upcoming plans,” a spokesperson commented this weekend.
The aggressive schedule of less than a year and a half has been boldly suggested. Nevertheless, expert analyses paint a longer timeline.
A Likely Schedule
“Chances are going to take 36 months for any significant output increase,” noted one chief investment officer.
Experts believe operators would likely spend:
- Year one: Sorting through new government and security contracts.
- Following phase: Commencing reconstruction of infrastructure.
- The third year: Reaching a position to significantly ramp up output.
The result could be an increase of around half a million barrels per day possibly by the end of the decade.
Interest vs. Willingness for Spending
There is a critical difference between multinationals’ interest and their appetite to invest substantially.
“In my view their attention is an eight, on a scale of one to 10. However, their willingness is a four or five, because there is no clarity yet.”
Experienced operators in the country echo this view. They believe that majors will politically talk up the opportunity while in practice moving with great care.
The Colossal Price Tag
The monetary outlay would be colossal. Independent estimates suggest that adding between 500,000 and a million barrels per day would require more than $10 billion in investment over two to three years.
But, returning output to peak levels of around 2.5 million barrels per day could require a monumental $80 billion to $90 billion over many more years.
The Unanswered Question of Taxpayer Funding
The suggestion of oil giants being reimbursed by the federal government has been often mentioned. Nevertheless, formal assurances on such a mechanism have not yet been provided.
This lack of clarity is the key impediment behind the industry's hesitation. Companies seek guarantees against nationalization and the risk that a subsequent government could renege on any agreement.
“It is essential to be shielded from sovereign risk, that we’ve experienced in Venezuela previously.”
Therefore, while rhetorical optimism runs strong, the operational challenges suggest a road of measured steps for potential significant investment in the Venezuelan energy industry.
