Energy analysts have shown deep doubt regarding recent claims that US large firms will swiftly pump billions of dollars to revive the country's dilapidated production facilities.
Demand for Iron-Clad Assurances
Lacking an absolute assurance of financial backing from the US federal government, analysts expect multinational oil companies to proceed with significant hesitation.
“It would be premature to speculate on any potential investments,” an official said this weekend.
The aggressive timeline of less than 18 months was boldly outlined. Yet, industry projections paint a different picture.
A Likely Schedule
“Chances are going to take multiple years for any significant output increase,” noted an industry expert.
He suggested operators would likely spend:
- Year one: Sorting through new government and security contracts.
- The second year: Beginning reconstruction of equipment.
- Final phase: Starting to meaningfully increase production.
This suggests an rise of around half a million bpd maybe by the end of the decade.
Appetite Compared to Readiness for Investment
Analysts draw a critical difference between firms' attention and their willingness to spend substantially.
“I think their interest is an high score, on a scale of ten. However, their willingness is a much lower, because there is a lack of certainty yet.”
Experienced operators in the country echo this caution. They believe that firms will publicly express enthusiasm while actually moving with deliberate slowness.
The Enormous Price Tag
The monetary investment would be colossal. University estimates suggest that adding between 500,000 and a million barrels per day would require over $10 billion in funding over several years.
But, returning production to historical levels of around 2.5 million barrels per day could require a staggering $80 billion to $90 billion over six or seven years.
The Unanswered Question of Government Backing
The prospect of energy companies being compensated by the US taxpayer has been repeatedly floated. Nevertheless, specific plans on such a mechanism have not yet been forthcoming.
Without certainty is the key factor behind the industry's caution. Companies seek protection against political risk and the risk that a different president could refuse any deal.
“They must be insured against political change, that we’ve witnessed in Venezuela previously.”
Therefore, while political optimism runs high, the practical realities suggest a journey of extreme caution for potential significant venture in the Venezuelan energy industry.
