Industry experts have shown significant doubt regarding bullish claims that American large firms will quickly invest billions of dollars to rebuild Venezuela's crumbling production facilities.
Requirement of Solid Protections
Lacking an solid promise of full reimbursement from the US federal government, analysts expect international firms to act with great care.
“It is premature to speculate on any potential investments,” a spokesperson said recently.
The aggressive timeline of less than a year and a half has been publicly proposed. However, expert analyses suggest a longer timeline.
A Probable Schedule
“Chances are going to take multiple years for any kind of output increase,” said one energy analyst.
Experts believe energy firms would likely spend:
- The first year: Securing new regulatory frameworks.
- Year two: Commencing overhaul of equipment.
- Year three: Being able to boost production.
This would lead to an increase of around half a million barrels per day perhaps by the end of the decade.
Interest vs. Readiness for Spending
There is a critical difference between companies' curiosity and their readiness to commit significantly.
“I believe their interest is an high score, on a range of one to 10. However, their appetite is a mid-range score, because there is significant uncertainty yet.”
Experienced operators in the region reinforce this sentiment. The expectation is that majors will publicly call it fantastic while actually moving with great care.
The Vast Price Tag
The financial outlay would be enormous. Independent analysis suggest that adding between 500,000 and a million barrels per day would require in excess of $10 billion in investment over several years.
Yet, restoring production to previous 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 Taxpayer Funding
The prospect of energy companies being compensated by the federal government has been often floated. However, concrete details on such a mechanism have so far not been announced.
Without certainty is the main reason for the sector's hesitation. Operators seek protection against sovereign risk and the chance that a subsequent government could cancel any deal.
“It is essential to be insured against nationalization, that we’ve seen in Venezuela already.”
In summary, while rhetorical promises runs high, the financial realities suggest a path of extreme caution for potential significant venture in the Venezuelan oil sector.
