Energy analysts have shown considerable caution regarding optimistic claims that American energy majors will rapidly invest vast sums of dollars to fix Venezuela's dilapidated energy sector.
Requirement of Iron-Clad Assurances
Without an “iron-clad guarantee” of full reimbursement from the American government, experts believe multinational oil companies to act with great care.
“It would be premature to comment on any future business activities,” a spokesperson commented recently.
The optimistic timeline of less than 18 months has been publicly outlined. Yet, expert analyses suggest a longer timeline.
A Likely Schedule
“Chances are going to take three years for any kind of production bounce,” commented one chief investment officer.
He suggested energy firms would likely spend:
- Year one: Securing new operating agreements.
- Following phase: Commencing reconstruction of facilities.
- The third year: Starting to significantly ramp up output.
This suggests an boost of around half a million bpd possibly by the end of the decade.
Appetite Compared to Willingness for Risk
Experts make a important separation between multinationals’ interest and their appetite to invest significantly.
“In my view their curiosity is an eight, on a scale of ten. However, their appetite is a much lower, because there is no clarity yet.”
Seasoned observers in the region echo this view. The thinking is that majors will publicly express enthusiasm while privately proceeding with great care.
The Enormous Investment Required
The required outlay would be colossal. University projections suggest that adding between half a million and a million bpd would require more than $10 billion in investment over several 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 Unanswered Issue of Government Backing
The suggestion of oil giants being compensated by the government has been repeatedly raised. But, concrete details on this proposal have not yet been forthcoming.
The absence of certainty is the main factor for the industry's hesitation. Firms seek safeguards against political risk and the risk that a future administration could cancel any deal.
“They must be protected from political change, that we’ve witnessed in Venezuela before.”
Ultimately, while rhetorical optimism runs strong, the operational challenges suggest a road of slow deliberation for potential major investment in the country's oil sector.
