Market specialists have voiced deep skepticism regarding optimistic predictions that American energy majors will quickly pump vast sums of dollars to revive Venezuela's crumbling production facilities.
Requirement of Iron-Clad Guarantees
Absent an “iron-clad guarantee” of financial backing from the US federal government, specialists predict global energy giants to proceed with great care.
“It seems too early to comment on any future business activities,” an official said recently.
The aggressive timeframe of less than a year and a half has been publicly outlined. Nevertheless, industry projections suggest a more cautious outlook.
A Probable Outlook
“It’s probably going to take multiple years for any significant output increase,” said one energy analyst.
Experts believe oil companies would likely spend:
- Year one: Sorting through new government and security contracts.
- Following phase: Beginning reconstruction of infrastructure.
- Year three: Reaching a position to significantly ramp up output.
The result could be an boost of around 500,000 barrels per day perhaps by the end of the decade.
Interest vs. Willingness for Spending
There is a key distinction between companies' curiosity and their readiness to commit heavily.
“I believe their interest is an high score, on a range of one to 10. However, their willingness is a mid-range score, because there is no clarity yet.”
Seasoned observers in the region reinforce this view. They believe that companies will publicly express enthusiasm while in practice proceeding with great care.
The Enormous Investment Required
The required bill would be enormous. University estimates suggest that adding between half a million and a million barrels per day would require more than $10 billion in funding over several years.
However, rebuilding output to historical levels of around 2.5 million bpd could require a staggering $80 billion to $90 billion over many more years.
The Outstanding Question of Government Backing
The suggestion of firms being reimbursed by the US taxpayer has been repeatedly mentioned. However, formal assurances on this proposal have not yet been provided.
The absence of a solid plan is the main factor behind the industry's reluctance. Firms seek protection against sovereign risk and the chance that a subsequent government could cancel any promise.
“It is essential to be insured against political change, that we’ve experienced in Venezuela before.”
Therefore, while political optimism runs high, the financial realities suggest a road of measured steps for any large-scale investment in the Venezuelan energy industry.
