Energy analysts have shown considerable caution regarding optimistic claims that American energy majors will rapidly pump vast sums of dollars to rebuild Venezuela's broken production facilities.
The Need for Absolute Guarantees
Lacking an solid promise of complete repayment from the American government, experts believe multinational oil companies to move with extreme caution.
“It is too early to speculate on any upcoming plans,” a representative stated this weekend.
The ambitious schedule of under 18 months has been boldly suggested. Nevertheless, realistic assessments indicate a more cautious outlook.
A Likely Timeline
“It is likely going to take 36 months for any significant recovery in production,” noted one industry expert.
The analysis indicates energy firms would likely spend:
- The first year: Sorting through new operating agreements.
- Year two: Commencing overhaul of facilities.
- Final phase: Being able to meaningfully increase production.
The result could be an increase of around half a million bpd perhaps by the end of the decade.
Appetite Compared to Willingness for Spending
There is a critical difference between firms' attention and their willingness to spend heavily.
“In my view their interest is an eight, on a scale of ten. But their willingness is a much lower, because there is a lack of certainty yet.”
Experienced observers in the country reinforce this sentiment. The thinking is that firms will politically talk up the opportunity while privately moving with great care.
The Enormous Cost
The monetary bill would be vast. Research estimates suggest that adding between half a million and a million barrels per day would require in excess of $10 billion in funding over several years.
Yet, restoring production to previous levels of around 2.5 million barrels per day could require a massive $80 billion to $90 billion over six or seven years.
The Pending Question of Government Backing
The prospect of energy companies being paid back by the US taxpayer has been often mentioned. But, concrete details on such a mechanism have not yet been announced.
The absence of clarity is the primary impediment for the sector's reluctance. Firms seek protection against nationalization and the possibility that a subsequent government could renege on any deal.
“It is essential to be shielded from sovereign risk, that we’ve witnessed in Venezuela previously.”
Therefore, while rhetorical confidence runs strong, the financial risks suggest a road of measured steps for potential significant investment in the country's oil sector.
