Industry experts have voiced considerable skepticism regarding recent statements that American large firms will quickly pump billions of dollars to revive Venezuela's dilapidated production facilities.
Requirement of Iron-Clad Assurances
Lacking an absolute assurance of complete repayment from the American government, analysts expect multinational oil companies to act with great care.
“It would be hasty to discuss any future business activities,” a representative commented this weekend.
The optimistic timeframe of under a year and a half was boldly proposed. Nevertheless, realistic assessments indicate a different picture.
A Probable Outlook
“It is likely going to take three years for any kind of production bounce,” noted one energy analyst.
He suggested oil companies would likely spend:
- The first year: Securing new operating agreements.
- Following phase: Investing in overhaul of equipment.
- Final phase: Being able to boost yield.
The result could be an rise of around half a million barrels per day perhaps by 2029.
Appetite Compared to Appetite for Investment
There is a important separation between multinationals’ interest and their readiness to commit substantially.
“I believe their attention is an high score, on a scale of ten. But their readiness is a mid-range score, because there is significant uncertainty yet.”
Veteran observers in the country echo this view. They believe that companies will politically talk up the opportunity while actually moving with great care.
The Colossal Cost
The financial investment would be colossal. Independent estimates suggest that adding between 500,000 and a million bpd would require over $10 billion in funding over two to three years.
However, returning output to historical levels of around 2.5 million barrels per day could require a monumental $80 billion to $90 billion over many more years.
The Unanswered Issue of Taxpayer Funding
The suggestion of energy companies being reimbursed by the US taxpayer has been repeatedly floated. But, specific plans on such a mechanism have not yet been provided.
The absence of clarity is the key impediment behind the sector's reluctance. Operators seek protection against sovereign risk and the possibility that a different president could renege on any deal.
“You need to be protected from sovereign risk, that we’ve witnessed in Venezuela already.”
Therefore, while political promises runs strong, the operational risks suggest a journey of extreme caution for any major financial commitment in the country's energy industry.
