Industry experts have expressed considerable caution regarding bullish statements that US energy majors will swiftly invest tens of billions of dollars to fix Venezuela's broken energy sector.
Demand for Solid Guarantees
Without an absolute assurance of financial backing from the US federal government, analysts expect global energy giants to move with extreme caution.
“It seems premature to speculate on any upcoming plans,” a spokesperson said in response.
The ambitious timeframe of under 18 months was publicly outlined. However, industry projections indicate a more cautious outlook.
A More Realistic Timeline
“Chances are going to take 36 months for any meaningful recovery in production,” said one chief investment officer.
Experts believe operators would likely spend:
- Year one: Sorting through new government and security contracts.
- The second year: Investing in overhaul of equipment.
- Year three: Reaching a position to boost yield.
The result could be an boost of around 500,000 bpd maybe by the end of the decade.
Appetite Compared to Willingness for Risk
Analysts draw a important separation between firms' attention and their appetite to invest heavily.
“I believe their attention is an high score, on a range of ten. But their willingness is a mid-range score, because there is a lack of certainty yet.”
Experienced operators in the region share this caution. The expectation is that firms will politically talk up the opportunity while privately moving with great care.
The Colossal Cost
The required outlay would be vast. Independent projections suggest that adding between 500,000 and a million bpd would require in excess of $10 billion in investment over several years.
But, returning output to previous levels of around 2.5 million bpd could require a monumental $80 billion to $90 billion over six or seven years.
The Outstanding Question of Federal Guarantees
The prospect of energy companies being reimbursed by the US taxpayer has been repeatedly mentioned. Nevertheless, concrete details on such a mechanism have so far not been announced.
The absence of certainty is the key factor behind the industry's hesitation. Operators seek safeguards against political risk and the risk that a different administration could renege on any deal.
“They must be shielded from political change, that we’ve witnessed in Venezuela before.”
Therefore, while rhetorical promises runs high, the practical challenges suggest a journey of slow deliberation for any large-scale investment in the Venezuelan oil sector.
