Industry experts have expressed considerable caution regarding bullish claims that American energy majors will quickly invest tens of billions of dollars to revive Venezuela's crumbling energy sector.
Requirement of Absolute Guarantees
Lacking an solid promise of complete repayment from the American government, specialists predict multinational oil companies to proceed with great care.
“It seems too early to discuss any future business activities,” an official said this weekend.
The ambitious timeframe of under 18 months was boldly suggested. Yet, realistic assessments suggest a longer timeline.
A Probable Schedule
“It is likely going to take three years for any significant recovery in production,” noted an energy analyst.
The analysis indicates oil companies would likely spend:
- The first year: Sorting through new operating agreements.
- Following phase: Beginning overhaul of facilities.
- The third year: Reaching a position to meaningfully increase output.
The result could be an increase of around half a million barrels per day maybe by the end of the decade.
Interest vs. Appetite for Spending
Experts make a critical difference between companies' curiosity and their appetite to invest substantially.
“I believe their attention is an high score, on a range of one to 10. But their willingness is a four or five, because there is no clarity yet.”
Experienced operators in the country echo this caution. They believe that majors will politically express enthusiasm while privately moving with extreme caution.
The Vast Price Tag
The financial investment would be colossal. Independent analysis suggest that increasing production by between 500,000 and a million bpd would require more than $10 billion in funding over several years.
However, returning production to previous levels of around 2.5 million barrels per day could require a staggering $80 billion to $90 billion over many more years.
The Unanswered Issue of Federal Guarantees
The idea of energy companies being compensated by the US taxpayer has been often mentioned. Nevertheless, specific plans on this proposal have so far not been provided.
This lack of a solid plan is the main impediment for the industry's reluctance. Companies seek guarantees against sovereign risk and the possibility that a different president could refuse any deal.
“You need to be protected from sovereign risk, that we’ve experienced in Venezuela already.”
Therefore, while political confidence runs strong, the financial realities suggest a journey of slow deliberation for any large-scale financial commitment in the Venezuelan energy industry.
