Industry experts have voiced deep skepticism regarding optimistic claims that American oil giants will rapidly commit vast sums of dollars to fix Venezuela's broken energy sector.
Demand for Solid Protections
Without an absolute assurance of complete repayment from the US federal government, experts believe global energy giants to proceed with extreme caution.
“It would be too early to discuss any potential investments,” a representative commented this weekend.
The optimistic timeline of under 18 months was boldly outlined. Yet, realistic assessments suggest a different picture.
A More Realistic Timeline
“It’s probably going to take 36 months for any significant recovery in production,” noted an chief investment officer.
He suggested operators would likely spend:
- The first year: Sorting through new government and security contracts.
- The second year: Investing in reconstruction of equipment.
- Year three: Starting to boost output.
The result could be an increase of around 500,000 bpd perhaps by the end of the decade.
Desire Versus Willingness for Spending
Experts make a key distinction between companies' curiosity and their willingness to spend heavily.
“I believe their interest is an high score, on a scale of one to 10. However, their willingness is a mid-range score, because there is no clarity yet.”
Experienced operators in the region share this caution. The thinking is that majors will publicly call it fantastic while in practice moving with great care.
The Vast Cost
The monetary bill would be vast. University analysis suggest that adding between 500,000 and a million bpd would require in excess of $10 billion in funding over several years.
Yet, rebuilding production to previous levels of around 2.5 million bpd could require a massive $80 billion to $90 billion over many more years.
The Outstanding Issue of Federal Guarantees
The prospect of oil giants being paid back by the government has been repeatedly mentioned. But, formal assurances on any guarantee have not yet been forthcoming.
Without a solid plan is the main impediment for the industry's hesitation. Operators seek safeguards against nationalization and the possibility that a different administration could renege on any promise.
“You need to be shielded from political change, that we’ve seen in Venezuela previously.”
Therefore, while political confidence runs strong, the operational realities suggest a journey of measured steps for any large-scale venture in the country's energy industry.
