Energy analysts have voiced deep caution regarding bullish claims that US energy majors will rapidly invest vast sums of dollars to revive Venezuela's dilapidated production facilities.
Requirement of Solid Guarantees
Without an absolute assurance of financial backing from the Washington, experts believe international firms to act with significant hesitation.
“It seems hasty to discuss any future business activities,” a spokesperson commented in response.
The aggressive schedule of under a year and a half was boldly proposed. Nevertheless, realistic assessments indicate a different picture.
A Likely Timeline
“It is likely going to take three years for any meaningful output increase,” commented one industry expert.
He suggested energy firms would likely spend:
- Initial phase: Securing new government and security contracts.
- Year two: Commencing overhaul of equipment.
- The third year: Being able to meaningfully increase production.
This suggests an increase of around half a million barrels per day maybe by 2029.
Desire Versus Readiness for Spending
Analysts draw a important separation between companies' curiosity and their willingness to spend significantly.
“In my view their attention is an high score, on a scale of ten. However, their willingness is a mid-range score, because there is significant uncertainty yet.”
Experienced operators in the country reinforce this sentiment. The expectation is that firms will politically talk up the opportunity while privately acting with great care.
The Enormous Price Tag
The monetary bill would be vast. Research estimates suggest that increasing production by between half a million and a million bpd would require over $10 billion in funding over two to three years.
Yet, restoring output to previous levels of around 2.5 million bpd could require a monumental $80 billion to $90 billion over many more years.
The Pending Issue of Government Backing
The prospect of firms being compensated by the US taxpayer has been repeatedly floated. But, concrete details on this proposal have not yet been announced.
The absence of certainty is the primary factor for the industry's hesitation. Firms seek protection against sovereign risk and the risk that a different government could refuse any agreement.
“It is essential to be protected from sovereign risk, that we’ve witnessed in Venezuela already.”
In summary, while rhetorical confidence runs strong, the practical realities suggest a road of slow deliberation for potential large-scale financial commitment in the country's oil sector.
