Industry experts have shown deep skepticism regarding recent predictions that US energy majors will rapidly commit billions of dollars to fix Venezuela's broken oil infrastructure.
The Need for Solid Guarantees
Absent an solid promise of financial backing from the US federal government, experts believe global energy giants to proceed with great care.
“It would be hasty to speculate on any future business activities,” an official stated in response.
The aggressive timeframe of less than 18 months was publicly suggested. Yet, industry projections paint a longer timeline.
A Likely Schedule
“It’s probably going to take 36 months for any meaningful recovery in production,” commented an industry expert.
He suggested operators would likely spend:
- The first year: Sorting through new operating agreements.
- Year two: Commencing rebuilding of infrastructure.
- Final phase: Starting to significantly ramp up output.
This suggests an boost of around half a million barrels per day perhaps by the end of the decade.
Interest vs. Readiness for Risk
Analysts draw a critical difference between multinationals’ interest and their willingness to spend heavily.
“In my view their interest is an eight, on a range of one to 10. But their willingness is a four or five, because there is no clarity yet.”
Seasoned diplomats in the country reinforce this view. The expectation is that firms will publicly talk up the opportunity while actually moving with extreme caution.
The Vast Price Tag
The required outlay would be enormous. Research projections suggest that adding between 500,000 and a million bpd would require more than $10 billion in funding over several years.
However, restoring output to peak levels of around 2.5 million barrels per day could require a massive $80 billion to $90 billion over six or seven years.
The Unanswered Issue of Taxpayer Funding
The suggestion of firms being paid back by the US taxpayer has been often floated. However, formal assurances on such a mechanism have not yet been forthcoming.
The absence of a solid plan is the main factor for the sector's reluctance. Companies seek guarantees against sovereign risk and the possibility that a different administration could renege on any promise.
“It is essential to be shielded from political change, that we’ve seen in Venezuela before.”
Ultimately, while rhetorical promises runs strong, the financial risks suggest a path of extreme caution for potential major investment in the country's oil sector.
