Industry experts have expressed considerable doubt regarding recent statements that American oil giants will rapidly commit tens of billions of dollars to rebuild Venezuela's broken production facilities.
Demand for Solid Guarantees
Absent an absolute assurance of complete repayment from the US federal government, analysts expect global energy giants to act with great care.
“It seems too early to comment on any potential investments,” a spokesperson commented this weekend.
The ambitious timeframe of under a year and a half was publicly suggested. Yet, expert analyses paint a more cautious outlook.
A Likely Schedule
“Chances are going to take 36 months for any meaningful production bounce,” commented an energy analyst.
He suggested energy firms would likely spend:
- Year one: Sorting through new operating agreements.
- Year two: Beginning overhaul of facilities.
- Final phase: Starting to boost production.
This suggests an rise of around half a million barrels per day maybe by the end of the decade.
Appetite Compared to Willingness for Risk
Analysts draw a critical difference between firms' attention and their appetite to invest heavily.
“I think their curiosity is an high score, on a scale of one to 10. However, their willingness is a mid-range score, because there is a lack of certainty yet.”
Seasoned diplomats in the region echo this view. The thinking is that majors will publicly express enthusiasm while in practice proceeding with extreme caution.
The Colossal Investment Required
The required investment would be colossal. Research estimates suggest that adding between half a million and a million barrels per day would require more than $10 billion in capital spending over several years.
But, rebuilding output to historical levels of around 2.5 million barrels per day could require a monumental $80 billion to $90 billion over many more years.
The Pending Issue of Federal Guarantees
The idea of energy companies being reimbursed by the US taxpayer has been repeatedly floated. Nevertheless, specific plans on this proposal have not yet been provided.
This lack of clarity is the main factor for the industry's reluctance. Companies seek protection against political risk and the risk that a different president could refuse any promise.
“It is essential to be protected from political change, that we’ve witnessed in Venezuela before.”
In summary, while rhetorical optimism runs strong, the operational risks suggest a road of extreme caution for potential major venture in the country's energy industry.
