Industry experts have shown deep skepticism regarding recent statements that American large firms will rapidly invest tens of billions of dollars to fix Venezuela's crumbling oil infrastructure.
Demand for Iron-Clad Assurances
Lacking an absolute assurance of full reimbursement from the Washington, analysts expect international firms to move with extreme caution.
“It would be premature to speculate on any potential investments,” a representative commented this weekend.
The optimistic timeframe of less than 18 months has been boldly suggested. Nevertheless, expert analyses suggest a different picture.
A Probable Schedule
“It’s probably going to take multiple years for any meaningful production bounce,” commented an energy analyst.
Experts believe operators would likely spend:
- Initial phase: Navigating new government and security contracts.
- Following phase: Investing in rebuilding of equipment.
- The third year: Reaching a position to meaningfully increase output.
This would lead to an increase of around 500,000 bpd perhaps by the end of the decade.
Interest vs. Readiness for Spending
There is a key distinction between firms' attention and their appetite to invest heavily.
“I believe their curiosity is an high score, on a range of one to 10. However, their readiness is a much lower, because there is a lack of certainty yet.”
Experienced observers in the country echo this caution. The thinking is that majors will politically talk up the opportunity while actually moving with deliberate slowness.
The Vast Investment Required
The required outlay would be vast. Research projections suggest that adding between 500,000 and a million barrels per day would require in excess of $10 billion in investment over two to three years.
However, returning production to previous levels of around 2.5 million barrels per day could require a massive $80 billion to $90 billion over many more years.
The Pending Question of Taxpayer Funding
The idea of oil giants being paid back by the US taxpayer has been often mentioned. But, specific plans on such a mechanism have not yet been forthcoming.
The absence of certainty is the main reason for the sector's reluctance. Firms seek guarantees against sovereign risk and the chance that a subsequent government could refuse any agreement.
“They must be protected from nationalization, that we’ve witnessed in Venezuela previously.”
Therefore, while rhetorical promises runs strong, the financial challenges suggest a journey of slow deliberation for any large-scale venture in the country's energy industry.
