Industry experts have shown considerable caution regarding bullish claims that American energy majors will rapidly commit vast sums of dollars to rebuild Venezuela's broken production facilities.
Requirement of Iron-Clad Guarantees
Without an solid promise of complete repayment from the US federal government, experts believe multinational oil companies to proceed with significant hesitation.
“It is too early to discuss any upcoming plans,” an official said this weekend.
The aggressive timeframe of less than 18 months was publicly proposed. Nevertheless, industry projections suggest a more cautious outlook.
A Likely Outlook
“It’s probably going to take 36 months for any meaningful output increase,” noted one energy analyst.
Experts believe oil companies would likely spend:
- The first year: Sorting through new operating agreements.
- Following phase: Investing in reconstruction of equipment.
- Final phase: Reaching a position to boost yield.
This suggests an boost of around half a million barrels per day maybe by the end of the decade.
Desire Versus Readiness for Risk
There is a key distinction between firms' attention and their appetite to invest significantly.
“In my view their curiosity is an high score, on a scale of one to 10. But their willingness is a much lower, because there is significant uncertainty yet.”
Experienced observers in the region reinforce this sentiment. The expectation is that firms will politically express enthusiasm while in practice proceeding with great care.
The Vast Cost
The required bill would be enormous. Research projections 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.
However, rebuilding output to historical levels of around 2.5 million bpd could require a massive $80 billion to $90 billion over six or seven years.
The Pending Question of Taxpayer Funding
The prospect of oil giants being paid back by the government has been repeatedly floated. Nevertheless, concrete details on such a mechanism have so far not been forthcoming.
Without clarity is the primary factor behind the industry's caution. Companies seek safeguards against nationalization and the possibility that a subsequent president could refuse any promise.
“They must be insured against political change, that we’ve experienced in Venezuela before.”
In summary, while political confidence runs strong, the financial challenges suggest a path of measured steps for any major financial commitment in the Venezuelan energy industry.
