Energy analysts have voiced considerable skepticism regarding bullish claims that US oil giants will quickly commit billions of dollars to revive Venezuela's broken production facilities.
Demand for Absolute Assurances
Without an solid promise of full reimbursement from the American government, experts believe international firms to proceed with great care.
“It seems hasty to speculate on any upcoming plans,” an official said in response.
The aggressive schedule of less than a year and a half was boldly outlined. Yet, expert analyses indicate a different picture.
A More Realistic Schedule
“It’s probably going to take multiple years for any kind of recovery in production,” commented an energy analyst.
He suggested operators would likely spend:
- Year one: Sorting through new regulatory frameworks.
- Following phase: Beginning overhaul of infrastructure.
- Year three: Reaching a position to boost production.
The result could be an increase of around 500,000 bpd possibly by 2029.
Desire Versus Appetite for Risk
There is a critical difference between firms' attention and their appetite to invest substantially.
“I think their interest is an high score, on a scale of one to 10. However, their appetite is a much lower, because there is no clarity yet.”
Experienced diplomats in the region echo this caution. The thinking is that firms will publicly call it fantastic while privately proceeding with deliberate slowness.
The Vast Investment Required
The monetary outlay would be vast. University projections suggest that adding between half a million and a million bpd would require in excess of $10 billion in funding over several years.
However, restoring production to previous levels of around 2.5 million bpd could require a staggering $80 billion to $90 billion over six or seven years.
The Outstanding Issue of Taxpayer Funding
The idea of oil giants being paid back by the US taxpayer has been repeatedly raised. Nevertheless, specific plans on any guarantee have not yet been forthcoming.
This lack of a solid plan is the main factor for the industry's reluctance. Companies seek protection against sovereign risk and the chance that a different president could refuse any promise.
“You need to be insured against sovereign risk, that we’ve experienced in Venezuela previously.”
Therefore, while rhetorical promises runs strong, the financial risks suggest a road of extreme caution for any major financial commitment in the country's energy industry.
