Industry experts have shown deep skepticism regarding bullish claims that US large firms will rapidly invest billions of dollars to rebuild Venezuela's crumbling production facilities.
Requirement of Absolute Assurances
Absent an solid promise of financial backing from the Washington, specialists predict multinational oil companies to proceed with extreme caution.
“It is hasty to speculate on any upcoming plans,” a representative commented this weekend.
The ambitious timeline of less than 18 months has been publicly outlined. However, realistic assessments suggest a longer timeline.
A More Realistic Outlook
“Chances are going to take multiple years for any meaningful output increase,” commented one energy analyst.
The analysis indicates energy firms would likely spend:
- Year one: Securing new operating agreements.
- Following phase: Beginning rebuilding of facilities.
- Final phase: 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. Willingness for Investment
There is a critical difference between firms' attention and their willingness to spend heavily.
“In my view their curiosity is an high score, on a scale of ten. I think their readiness is a much lower, because there is no clarity yet.”
Veteran operators in the sector reinforce this sentiment. They believe that firms will publicly call it fantastic while privately moving with extreme caution.
The Enormous Investment Required
The monetary investment would be colossal. Research analysis suggest that increasing production by between half a million and a million bpd would require in excess of $10 billion in investment over several years.
Yet, rebuilding output to peak levels of around 2.5 million bpd could require a massive $80 billion to $90 billion over many more years.
The Pending Issue of Government Backing
The suggestion of energy companies being paid back by the government has been often floated. But, specific plans on such a mechanism have not yet been forthcoming.
Without clarity is the key impediment behind the industry's hesitation. Companies seek guarantees against sovereign risk and the risk that a different government could refuse any agreement.
“You need to be insured against political change, that we’ve seen in Venezuela previously.”
Ultimately, while rhetorical confidence runs high, the operational risks suggest a path of extreme caution for potential major investment in the country's energy industry.
