Industry experts have expressed deep caution regarding optimistic predictions that American energy majors will swiftly commit vast sums of dollars to revive Venezuela's dilapidated energy sector.
The Need for Solid Guarantees
Without an solid promise of full reimbursement from the Washington, analysts expect global energy giants to move with extreme caution.
“It would be hasty to speculate on any future business activities,” a representative commented this weekend.
The aggressive timeline of under 18 months has been publicly suggested. Yet, expert analyses indicate a longer timeline.
A Probable Schedule
“Chances are going to take 36 months for any meaningful output increase,” said one energy analyst.
Experts believe energy firms would likely spend:
- Year one: Navigating new government and security contracts.
- Following phase: Investing in reconstruction of equipment.
- Final phase: Being able to boost yield.
This would lead to an rise of around 500,000 barrels per day perhaps by the end of the decade.
Desire Versus Appetite for Investment
Experts make a important separation between firms' attention and their readiness to commit substantially.
“In my view their attention is an eight, on a range of ten. But their readiness is a mid-range score, because there is a lack of certainty yet.”
Veteran observers in the region echo this caution. The thinking is that majors will publicly talk up the opportunity while in practice moving with extreme caution.
The Vast Cost
The required investment would be colossal. Independent analysis suggest that increasing production by between half a million and a million bpd would require more than $10 billion in investment over several years.
However, restoring production to historical levels of around 2.5 million barrels per day could require a massive $80 billion to $90 billion over six or seven years.
The Unanswered Issue of Taxpayer Funding
The prospect of firms being compensated by the federal government has been repeatedly mentioned. However, concrete details on such a mechanism have not yet been announced.
The absence of certainty is the primary impediment behind the sector's reluctance. Operators seek protection against political risk and the risk that a future president could refuse any promise.
“They must be insured against sovereign risk, that we’ve seen in Venezuela already.”
In summary, while political promises runs high, the financial challenges suggest a journey of slow deliberation for any significant venture in the country's oil sector.
