Industry experts have expressed considerable doubt regarding optimistic predictions that US energy majors will rapidly invest vast sums of dollars to revive Venezuela's dilapidated oil infrastructure.
Demand for Iron-Clad Assurances
Absent an absolute assurance of full reimbursement from the Washington, experts believe global energy giants to move with significant hesitation.
“It would be hasty to speculate on any upcoming plans,” a representative said this weekend.
The optimistic schedule of less than 18 months was publicly outlined. However, expert analyses paint a different picture.
A Probable Outlook
“Chances are going to take 36 months for any significant production bounce,” said an energy analyst.
The analysis indicates oil companies would likely spend:
- Initial phase: Securing new government and security contracts.
- The second year: Commencing overhaul of infrastructure.
- The third year: Reaching a position to significantly ramp up output.
The result could be an rise of around half a million bpd perhaps 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 substantially.
“In my view their curiosity is an high score, on a scale of ten. But their readiness is a four or five, because there is a lack of certainty yet.”
Experienced observers in the sector share this view. They believe that majors will publicly express enthusiasm while actually acting with deliberate slowness.
The Colossal Investment Required
The required outlay would be enormous. Independent estimates suggest that increasing production by between 500,000 and a million bpd would require over $10 billion in funding over two to three years.
But, rebuilding production to historical levels of around 2.5 million barrels per day could require a massive $80 billion to $90 billion over six or seven years.
The Pending Question of Taxpayer Funding
The suggestion of energy companies being reimbursed by the US taxpayer has been repeatedly raised. But, formal assurances on any guarantee have so far not been forthcoming.
Without a solid plan is the primary reason for the sector's caution. Companies seek guarantees against political risk and the chance that a different president could cancel any agreement.
“You need to be protected from nationalization, that we’ve witnessed in Venezuela before.”
Ultimately, while political promises runs high, the operational risks suggest a road of slow deliberation for potential large-scale investment in the Venezuelan energy industry.
