Industry experts have shown significant skepticism regarding bullish predictions that US energy majors will rapidly invest billions of dollars to rebuild Venezuela's dilapidated energy sector.
Requirement of Solid Assurances
Absent an absolute assurance of complete repayment from the American government, analysts expect global energy giants to move with great care.
“It would be hasty to discuss any upcoming plans,” a representative stated recently.
The optimistic schedule of less than a year and a half has been publicly suggested. However, expert analyses indicate a different picture.
A Probable Timeline
“Chances are going to take multiple years for any meaningful recovery in production,” said an industry expert.
The analysis indicates oil companies would likely spend:
- Year one: Securing new operating agreements.
- Year two: Commencing overhaul of infrastructure.
- Year three: Starting to meaningfully increase production.
This would lead to an rise of around half a million barrels per day possibly by the end of the decade.
Appetite Compared to Appetite for Investment
Experts make a critical difference between companies' curiosity and their readiness to commit heavily.
“In my view their interest is an eight, on a scale of ten. I think their readiness is a mid-range score, because there is significant uncertainty yet.”
Seasoned observers in the sector reinforce this view. They believe that firms will publicly talk up the opportunity while privately moving with extreme caution.
The Enormous Price Tag
The monetary bill would be enormous. University analysis 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, rebuilding output to peak levels of around 2.5 million bpd could require a massive $80 billion to $90 billion over many more years.
The Pending Question of Taxpayer Funding
The suggestion of firms being reimbursed by the US taxpayer has been repeatedly floated. However, formal assurances on such a mechanism have not yet been forthcoming.
Without a solid plan is the primary impediment behind the industry's reluctance. Operators seek safeguards against political risk and the chance that a subsequent administration could cancel any agreement.
“You need to be insured against sovereign risk, that we’ve witnessed in Venezuela before.”
In summary, while rhetorical promises runs strong, the financial risks suggest a journey of slow deliberation for any significant financial commitment in the country's oil sector.
