Market specialists have shown deep skepticism regarding optimistic claims that US oil giants will quickly pump billions of dollars to rebuild Venezuela's crumbling energy sector.
Requirement of Solid Guarantees
Absent an “iron-clad guarantee” of full reimbursement from the US federal government, experts believe international firms to move with great care.
“It would be too early to speculate on any upcoming plans,” an official said in response.
The aggressive timeline of less than 18 months was publicly outlined. However, industry projections paint a more cautious outlook.
A More Realistic Timeline
“It’s probably going to take three years for any meaningful output increase,” commented one chief investment officer.
He suggested energy firms would likely spend:
- The first year: Navigating new operating agreements.
- The second year: Commencing rebuilding of infrastructure.
- Year three: Reaching a position to boost production.
This suggests an boost of around half a million barrels per day possibly by the end of the decade.
Appetite Compared to Readiness for Risk
There is a critical difference between firms' attention and their willingness to spend significantly.
“I believe their attention is an high score, on a range of ten. I think their willingness is a four or five, because there is no clarity yet.”
Seasoned diplomats in the country echo this caution. They believe that firms will politically express enthusiasm while privately proceeding with extreme caution.
The Enormous Investment Required
The financial outlay would be enormous. Independent estimates suggest that increasing production by between 500,000 and a million bpd would require in excess of $10 billion in investment over two to three years.
But, restoring production to previous levels of around 2.5 million barrels per day could require a monumental $80 billion to $90 billion over many more years.
The Outstanding Issue of Government Backing
The suggestion of firms being paid back by the government has been repeatedly mentioned. But, concrete details on any guarantee have not yet been announced.
This lack of a solid plan is the primary reason for the industry's reluctance. Operators seek protection against nationalization and the possibility that a subsequent president could cancel any agreement.
“They must be protected from nationalization, that we’ve witnessed in Venezuela already.”
Therefore, while political optimism runs high, the financial risks suggest a road of extreme caution for potential major venture in the country's oil sector.
