Industry experts have voiced considerable doubt regarding optimistic predictions that American oil giants will quickly invest vast sums of dollars to fix Venezuela's crumbling production facilities.
The Need for Iron-Clad Guarantees
Without an “iron-clad guarantee” of financial backing from the Washington, analysts expect multinational oil companies to move with great care.
“It seems hasty to comment on any potential investments,” an official commented in response.
The ambitious timeframe of less than 18 months has been publicly suggested. Nevertheless, expert analyses suggest a different picture.
A More Realistic Outlook
“It is likely going to take multiple years for any kind of recovery in production,” commented one industry expert.
The analysis indicates energy firms would likely spend:
- Year one: Securing new government and security contracts.
- Year two: Commencing rebuilding of facilities.
- The third year: Reaching a position to meaningfully increase production.
This would lead to an rise of around 500,000 bpd perhaps by the end of the decade.
Desire Versus Willingness for Risk
Analysts draw a critical difference between firms' attention and their willingness to spend heavily.
“In my view their curiosity is an high score, on a scale of one to 10. I think their willingness is a four or five, because there is significant uncertainty yet.”
Seasoned observers in the sector reinforce this sentiment. The expectation is that firms will publicly express enthusiasm while actually moving with extreme caution.
The Enormous Investment Required
The financial investment would be vast. University analysis suggest that increasing production by between 500,000 and a million barrels per day would require in excess of $10 billion in investment over several years.
But, returning production to peak levels of around 2.5 million bpd could require a monumental $80 billion to $90 billion over many more years.
The Outstanding Issue of Taxpayer Funding
The idea of energy companies being compensated by the US taxpayer has been repeatedly mentioned. But, formal assurances on this proposal have so far not been provided.
Without a solid plan is the key factor for the industry's reluctance. Firms seek guarantees against sovereign risk and the risk that a future president could cancel any agreement.
“You need to be protected from political change, that we’ve seen in Venezuela already.”
In summary, while political promises runs strong, the operational challenges suggest a path of extreme caution for any significant venture in the country's energy industry.
