Industry experts have voiced significant skepticism regarding bullish statements that US large firms will swiftly invest tens of billions of dollars to revive Venezuela's broken energy sector.
The Need for Solid Assurances
Absent an “iron-clad guarantee” of financial backing from the US federal government, analysts expect multinational oil companies to proceed with significant hesitation.
“It would be premature to discuss any potential investments,” a representative commented recently.
The optimistic timeline of under a year and a half has been publicly outlined. However, realistic assessments paint a different picture.
A Likely Schedule
“It’s probably going to take three years for any kind of output increase,” commented an chief investment officer.
The analysis indicates oil companies would likely spend:
- Year one: Sorting through new government and security contracts.
- Year two: Beginning rebuilding of equipment.
- The third year: Being able to meaningfully increase yield.
The result could be an boost of around half a million bpd possibly by 2029.
Appetite Compared to Readiness for Investment
Experts make a important separation between companies' curiosity and their willingness to spend significantly.
“I think their attention is an high score, on a range of one to 10. I think their appetite is a mid-range score, because there is a lack of certainty yet.”
Veteran operators in the sector echo this caution. The thinking is that companies will publicly call it fantastic while in practice acting with deliberate slowness.
The Enormous Cost
The monetary investment would be colossal. Independent estimates suggest that increasing production by between half a million and a million barrels per day would require over $10 billion in investment over two to three years.
However, rebuilding production to historical levels of around 2.5 million barrels per day could require a massive $80 billion to $90 billion over many more years.
The Pending Issue of Federal Guarantees
The prospect of energy companies being reimbursed by the US taxpayer has been often mentioned. Nevertheless, formal assurances on this proposal have so far not been forthcoming.
This lack of a solid plan is the primary reason behind the sector's caution. Operators seek guarantees against political risk and the chance that a different president could cancel any promise.
“It is essential to be shielded from nationalization, that we’ve seen in Venezuela already.”
Ultimately, while rhetorical promises runs high, the financial realities suggest a path of slow deliberation for any major venture in the country's oil sector.
