Industry experts have expressed considerable skepticism regarding optimistic predictions that American large firms will swiftly commit tens of billions of dollars to revive Venezuela's crumbling production facilities.
Demand for Solid Assurances
Without an solid promise of financial backing from the US federal government, experts believe global energy giants to move with great care.
“It is too early to comment on any potential investments,” a representative stated recently.
The optimistic schedule of less than 18 months has been publicly outlined. However, realistic assessments suggest a more cautious outlook.
A Probable Outlook
“It is likely going to take 36 months for any kind of production bounce,” commented one energy analyst.
He suggested operators would likely spend:
- Initial phase: Sorting through new government and security contracts.
- Following phase: Beginning rebuilding of facilities.
- Year three: Reaching a position to significantly ramp up production.
This would lead to an boost of around half a million barrels per day possibly by the end of the decade.
Appetite Compared to Readiness for Investment
There is a critical difference between firms' attention and their appetite to invest substantially.
“I think their curiosity is an high score, on a range of one to 10. However, their readiness is a mid-range score, because there is a lack of certainty yet.”
Veteran diplomats in the sector reinforce this view. The expectation is that firms will politically talk up the opportunity while actually acting with extreme caution.
The Vast Cost
The monetary outlay would be colossal. Research analysis suggest that increasing production by between half a million and a million bpd would require over $10 billion in investment over two to three years.
Yet, returning production to historical levels of around 2.5 million barrels per day could require a massive $80 billion to $90 billion over many more years.
The Unanswered Question of Government Backing
The idea of energy companies being paid back by the government has been often raised. But, specific plans on any guarantee have so far not been provided.
Without certainty is the key factor behind the industry's caution. Operators seek guarantees against nationalization and the risk that a subsequent administration could renege on any promise.
“They must be shielded from nationalization, that we’ve experienced in Venezuela previously.”
Therefore, while political promises runs strong, the financial challenges suggest a journey of slow deliberation for any major investment in the Venezuelan oil sector.
