Industry experts have expressed significant skepticism regarding optimistic claims that US energy majors will swiftly invest billions of dollars to fix Venezuela's broken energy sector.
Requirement of Absolute Protections
Lacking an solid promise of full reimbursement from the Washington, specialists predict multinational oil companies to proceed with extreme caution.
“It seems premature to discuss any future business activities,” an official commented recently.
The aggressive timeline of less than 18 months was publicly suggested. Nevertheless, realistic assessments indicate a longer timeline.
A Likely Outlook
“Chances are going to take multiple years for any meaningful output increase,” noted an energy analyst.
He suggested oil companies would likely spend:
- Initial phase: Securing new government and security contracts.
- The second year: Beginning reconstruction of equipment.
- Final phase: Being able to boost output.
The result could be an rise of around 500,000 bpd possibly by the end of the decade.
Appetite Compared to Readiness for Risk
There is a key distinction between companies' curiosity and their willingness to spend significantly.
“In my view their interest is an eight, on a range of one to 10. I think their readiness is a much lower, because there is significant uncertainty yet.”
Experienced diplomats in the country reinforce this view. The thinking is that companies will politically talk up the opportunity while actually moving with deliberate slowness.
The Vast Price Tag
The required investment would be vast. University estimates suggest that adding between 500,000 and a million bpd would require over $10 billion in capital spending over two to three years.
Yet, rebuilding production to historical levels of around 2.5 million bpd could require a staggering $80 billion to $90 billion over six or seven years.
The Unanswered Issue of Government Backing
The suggestion of oil giants being paid back by the federal government has been often floated. However, formal assurances on any guarantee have not yet been forthcoming.
Without a solid plan is the main impediment behind the sector's hesitation. Companies seek protection against nationalization and the possibility that a future government could cancel any agreement.
“You need to be shielded from political change, that we’ve witnessed in Venezuela before.”
Ultimately, while rhetorical optimism runs strong, the operational risks suggest a journey of extreme caution for potential significant investment in the country's energy industry.
