Energy analysts have voiced significant skepticism regarding optimistic claims that US energy majors will quickly invest billions of dollars to revive Venezuela's dilapidated production facilities.
Demand for Absolute Assurances
Lacking an absolute assurance of financial backing from the US federal government, analysts expect multinational oil companies to proceed with extreme caution.
“It is too early to speculate on any potential investments,” a representative stated this weekend.
The optimistic timeline of less than 18 months was boldly proposed. Yet, industry projections paint a longer timeline.
A More Realistic Schedule
“It is likely going to take multiple years for any meaningful production bounce,” said one industry expert.
The analysis indicates operators would likely spend:
- Year one: Navigating new government and security contracts.
- Following phase: Commencing reconstruction of infrastructure.
- The third year: Reaching a position to boost output.
This would lead to an increase of around half a million barrels per day possibly by 2029.
Appetite Compared to Appetite for Investment
Analysts draw a important separation between companies' curiosity and their appetite to invest heavily.
“In my view their curiosity is an high score, on a range of one to 10. However, their readiness is a mid-range score, because there is significant uncertainty yet.”
Seasoned observers in the country reinforce this caution. The expectation is that majors will publicly talk up the opportunity while actually proceeding with deliberate slowness.
The Colossal Cost
The financial bill would be colossal. Independent estimates suggest that increasing production by between half a million and a million bpd would require in excess of $10 billion in funding over two to three years.
However, rebuilding production to peak levels of around 2.5 million bpd could require a massive $80 billion to $90 billion over many more years.
The Outstanding Issue of Federal Guarantees
The prospect of firms being compensated by the US taxpayer has been repeatedly floated. However, specific plans on this proposal have not yet been forthcoming.
This lack of a solid plan is the key reason for the sector's reluctance. Firms seek protection against political risk and the possibility that a subsequent government could cancel any deal.
“They must be protected from nationalization, that we’ve witnessed in Venezuela previously.”
In summary, while political confidence runs high, the practical realities suggest a road of measured steps for potential major venture in the country's energy industry.
