Industry experts have voiced deep skepticism regarding bullish claims that US oil giants will quickly invest vast sums of dollars to fix Venezuela's crumbling energy sector.
Demand for Solid Protections
Absent an “iron-clad guarantee” of complete repayment from the American government, experts believe multinational oil companies to act with extreme caution.
“It seems premature to speculate on any potential investments,” an official stated this weekend.
The aggressive schedule of under 18 months has been boldly outlined. Yet, realistic assessments suggest a different picture.
A Likely Schedule
“Chances are going to take three years for any significant output increase,” commented one energy analyst.
He suggested energy firms would likely spend:
- Initial phase: Securing new regulatory frameworks.
- The second year: Beginning overhaul of facilities.
- Year three: Being able to meaningfully increase production.
This would lead to an rise of around 500,000 bpd maybe by the end of the decade.
Desire Versus Willingness for Investment
Experts make a key distinction between companies' curiosity and their appetite to invest substantially.
“In my view their interest is an eight, on a range of one to 10. However, their readiness is a mid-range score, because there is significant uncertainty yet.”
Experienced observers in the country echo this caution. They believe that companies will politically talk up the opportunity while actually acting with extreme caution.
The Enormous Cost
The required outlay would be colossal. University 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.
However, restoring production to historical levels of around 2.5 million barrels per day could require a staggering $80 billion to $90 billion over six or seven years.
The Outstanding Issue of Federal Guarantees
The suggestion of oil giants being reimbursed by the government has been repeatedly floated. But, concrete details on any guarantee have not yet been provided.
This lack of certainty is the main impediment behind the sector's reluctance. Companies seek protection against political risk and the chance that a different president could renege on any deal.
“It is essential to be shielded from political change, that we’ve seen in Venezuela already.”
Therefore, while political promises runs strong, the practical risks suggest a path of extreme caution for any significant financial commitment in the Venezuelan energy industry.
