Market specialists have expressed significant doubt regarding optimistic claims that US energy majors will quickly invest vast sums of dollars to revive Venezuela's broken energy sector.
Demand for Iron-Clad Assurances
Absent an “iron-clad guarantee” of financial backing from the US federal government, analysts expect multinational oil companies to proceed with great care.
“It would be too early to discuss any upcoming plans,” an official commented in response.
The ambitious timeframe of under 18 months was publicly suggested. Nevertheless, industry projections suggest a more cautious outlook.
A Likely Timeline
“Chances are going to take three years for any significant recovery in production,” commented an industry expert.
Experts believe energy firms would likely spend:
- The first year: Sorting through new operating agreements.
- Following phase: Commencing overhaul of facilities.
- The third year: Reaching a position to boost production.
The result could be an boost of around half a million bpd possibly by the end of the decade.
Interest vs. Willingness for Spending
There is a critical difference between companies' curiosity and their readiness to commit substantially.
“I think their interest is an eight, on a range of ten. I think their readiness is a mid-range score, because there is a lack of certainty yet.”
Experienced operators in the country echo this sentiment. They believe that majors will publicly call it fantastic while privately acting with deliberate slowness.
The Vast Price Tag
The monetary outlay would be enormous. Research analysis suggest that adding between 500,000 and a million barrels per day would require in excess of $10 billion in capital spending over several years.
However, rebuilding production 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 Pending Issue of Government Backing
The prospect of energy companies being paid back by the federal government has been often mentioned. But, concrete details on this proposal have not yet been announced.
Without a solid plan is the primary factor behind the industry's hesitation. Firms seek protection against political risk and the risk that a different president could renege on any agreement.
“It is essential to be shielded from political change, that we’ve seen in Venezuela before.”
Therefore, while political confidence runs high, the operational realities suggest a road of measured steps for potential major financial commitment in the country's oil sector.