Market specialists have shown deep doubt regarding bullish statements that US oil giants will rapidly invest vast sums of dollars to rebuild Venezuela's dilapidated production facilities.
Requirement of Iron-Clad Assurances
Lacking an absolute assurance of financial backing from the US federal government, experts believe global energy giants to act with great care.
“It is hasty to comment on any potential investments,” an official said in response.
The aggressive timeline of less than 18 months was boldly proposed. Yet, industry projections paint a longer timeline.
A More Realistic Timeline
“Chances are going to take three years for any meaningful output increase,” noted one industry expert.
The analysis indicates oil companies would likely spend:
- Initial phase: Sorting through new government and security contracts.
- Following phase: Investing in rebuilding of facilities.
- The third year: Starting to meaningfully increase output.
This would lead to an rise of around 500,000 barrels per day perhaps by 2029.
Interest vs. Willingness for Risk
Experts make a important separation between multinationals’ interest and their readiness to commit significantly.
“I think their attention is an high score, on a scale of one to 10. But their readiness is a mid-range score, because there is significant uncertainty yet.”
Seasoned diplomats in the sector reinforce this sentiment. The expectation is that firms will politically call it fantastic while actually proceeding with great care.
The Vast Investment Required
The required outlay would be enormous. University projections suggest that adding between half a million and a million barrels per day would require more than $10 billion in funding over several years.
Yet, returning production 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 Federal Guarantees
The suggestion of energy companies being reimbursed by the government has been often mentioned. However, concrete details on any guarantee have so far not been forthcoming.
Without a solid plan is the main reason behind the industry's caution. Firms seek protection against nationalization and the risk that a different president could renege on any agreement.
“They must be shielded from political change, that we’ve seen in Venezuela before.”
Therefore, while political promises runs high, the practical challenges suggest a path of extreme caution for any large-scale investment in the Venezuelan energy industry.
