Industry experts have shown deep caution regarding optimistic claims that American energy majors will rapidly pump tens of billions of dollars to revive Venezuela's broken oil infrastructure.
Requirement of Solid Assurances
Absent an solid promise of complete repayment from the American government, analysts expect multinational oil companies to move with extreme caution.
“It would be too early to discuss any potential investments,” an official said recently.
The ambitious timeline of under 18 months has been publicly proposed. However, expert analyses indicate a different picture.
A Likely Timeline
“Chances are going to take 36 months for any significant recovery in production,” commented an energy analyst.
Experts believe operators would likely spend:
- Year one: Sorting through new regulatory frameworks.
- Year two: Investing in rebuilding of facilities.
- Final phase: Starting to boost yield.
The result could be an boost of around half a million barrels per day possibly by the end of the decade.
Appetite Compared to Willingness for Risk
Analysts draw a important separation between firms' attention and their readiness to commit substantially.
“I think their curiosity is an high score, on a range of ten. However, their appetite is a mid-range score, because there is no clarity yet.”
Experienced operators in the sector reinforce this sentiment. They believe that majors will politically express enthusiasm while privately moving with great care.
The Vast Cost
The financial investment would be enormous. Research estimates suggest that adding between 500,000 and a million barrels per day would require in excess of $10 billion in capital spending over two to three years.
However, restoring output to previous levels of around 2.5 million barrels per day could require a monumental $80 billion to $90 billion over six or seven years.
The Unanswered Question of Federal Guarantees
The prospect of energy companies being paid back by the US taxpayer has been often floated. However, formal assurances on any guarantee have not yet been forthcoming.
Without a solid plan is the main impediment behind the sector's hesitation. Firms seek guarantees against sovereign risk and the risk that a subsequent administration could renege on any deal.
“You need to be protected from political change, that we’ve witnessed in Venezuela already.”
Ultimately, while rhetorical optimism runs high, the practical risks suggest a journey of measured steps for any major investment in the country's energy industry.
