Industry experts have expressed considerable doubt regarding bullish predictions that US large firms will swiftly pump vast sums of dollars to revive Venezuela's crumbling energy sector.
Demand for Absolute Protections
Lacking an absolute assurance of full reimbursement from the Washington, analysts expect multinational oil companies to move with extreme caution.
“It seems too early to speculate on any upcoming plans,” a representative stated this weekend.
The ambitious timeframe of under a year and a half has been boldly outlined. However, expert analyses suggest a different picture.
A More Realistic Schedule
“It is likely going to take 36 months for any kind of production bounce,” commented an energy analyst.
The analysis indicates operators would likely spend:
- The first year: Sorting through new operating agreements.
- Year two: Beginning rebuilding of facilities.
- Year three: Being able to meaningfully increase production.
This suggests an increase of around 500,000 barrels per day possibly by the end of the decade.
Interest vs. Readiness for Investment
There is a important separation between companies' curiosity and their appetite to invest significantly.
“I believe their interest is an high score, on a range of ten. But their readiness is a much lower, because there is a lack of certainty yet.”
Experienced diplomats in the region reinforce this view. The expectation is that firms will politically talk up the opportunity while in practice acting with great care.
The Vast Investment Required
The required investment would be vast. Research projections suggest that increasing production by between 500,000 and a million barrels per day would require in excess of $10 billion in capital spending over two to three years.
But, returning production to peak levels of around 2.5 million barrels per day could require a massive $80 billion to $90 billion over six or seven years.
The Outstanding Question of Federal Guarantees
The suggestion of energy companies being compensated by the US taxpayer has been repeatedly raised. However, formal assurances on any guarantee have so far not been provided.
The absence of clarity is the main reason for the sector's reluctance. Firms seek guarantees against sovereign risk and the possibility that a subsequent administration could cancel any agreement.
“You need to be shielded from political change, that we’ve seen in Venezuela before.”
Therefore, while rhetorical optimism runs strong, the financial risks suggest a journey of extreme caution for potential significant investment in the country's energy industry.
