Industry experts have expressed considerable skepticism regarding recent statements that US energy majors will quickly pump vast sums of dollars to fix Venezuela's crumbling energy sector.
The Need for Absolute Protections
Lacking an “iron-clad guarantee” of complete repayment from the Washington, specialists predict multinational oil companies to move with significant hesitation.
“It is hasty to discuss any future business activities,” a representative commented recently.
The aggressive schedule of less than 18 months was publicly outlined. Yet, industry projections paint a different picture.
A Probable Outlook
“It’s probably going to take 36 months for any kind of production bounce,” said one industry expert.
The analysis indicates energy firms would likely spend:
- Initial phase: Sorting through new operating agreements.
- Year two: Beginning rebuilding of equipment.
- Year three: Being able to significantly ramp up output.
This suggests an boost of around half a million barrels per day perhaps by the end of the decade.
Appetite Compared to Appetite for Risk
Analysts draw a critical difference between firms' attention and their appetite to invest significantly.
“I think their interest is an high score, on a range of one to 10. I think their readiness is a mid-range score, because there is a lack of certainty yet.”
Veteran observers in the sector reinforce this view. They believe that companies will publicly talk up the opportunity while privately proceeding with extreme caution.
The Colossal Price Tag
The financial outlay would be colossal. Research analysis suggest that increasing production by between half a million and a million barrels per day would require over $10 billion in investment over two to three years.
Yet, restoring output to peak levels of around 2.5 million barrels per day could require a staggering $80 billion to $90 billion over many more years.
The Unanswered Question of Federal Guarantees
The prospect of energy companies being paid back by the US taxpayer has been repeatedly mentioned. However, concrete details on this proposal have not yet been provided.
This lack of a solid plan is the key reason behind the sector's caution. Companies seek guarantees against political risk and the risk that a future government could refuse any promise.
“They must be shielded from political change, that we’ve seen in Venezuela before.”
Therefore, while political confidence runs high, the operational challenges suggest a journey of extreme caution for any major investment in the country's oil sector.
