Industry experts have shown significant doubt regarding bullish predictions that US oil giants will swiftly commit billions of dollars to rebuild the country's dilapidated production facilities.
Requirement of Iron-Clad Assurances
Absent an absolute assurance of financial backing from the US federal government, analysts expect international firms to proceed with significant hesitation.
“It seems hasty to speculate on any potential investments,” an official stated this weekend.
The ambitious schedule of less than 18 months has been publicly proposed. Yet, expert analyses paint a more cautious outlook.
A Probable Schedule
“It is likely going to take multiple years for any kind of production bounce,” commented an chief investment officer.
He suggested operators would likely spend:
- Year one: Securing new operating agreements.
- Year two: Investing in rebuilding of infrastructure.
- The third year: Being able to significantly ramp up output.
The result could be an boost of around half a million barrels per day perhaps by the end of the decade.
Appetite Compared to Appetite for Investment
Experts make a critical difference between multinationals’ interest and their readiness to commit heavily.
“I believe their attention is an high score, on a scale of one to 10. However, their readiness is a much lower, because there is significant uncertainty yet.”
Experienced observers in the region reinforce this caution. The thinking is that firms will politically talk up the opportunity while in practice moving with extreme caution.
The Vast Price Tag
The financial outlay would be vast. Research analysis suggest that increasing production by between half a million and a million barrels per day would require more than $10 billion in investment over several years.
But, rebuilding production to previous levels of around 2.5 million bpd could require a staggering $80 billion to $90 billion over six or seven years.
The Pending Issue of Taxpayer Funding
The prospect of energy companies being paid back by the government has been repeatedly floated. But, specific plans on such a mechanism have so far not been forthcoming.
This lack of a solid plan is the main reason behind the industry's hesitation. Operators seek guarantees against sovereign risk and the risk that a different government could refuse any promise.
“You need to be protected from nationalization, that we’ve witnessed in Venezuela before.”
Ultimately, while political optimism runs strong, the operational realities suggest a path of measured steps for potential major investment in the Venezuelan energy industry.
