Market specialists have voiced considerable caution regarding optimistic statements that American oil giants will rapidly invest billions of dollars to rebuild the country's dilapidated production facilities.
Demand for Iron-Clad Guarantees
Without an solid promise of full reimbursement from the Washington, experts believe international firms to move with great care.
“It is premature to discuss any future business activities,” an official said this weekend.
The optimistic timeline of less than a year and a half has been publicly outlined. Yet, industry projections paint a more cautious outlook.
A More Realistic Timeline
“Chances are going to take 36 months for any significant production bounce,” said an industry expert.
Experts believe energy firms would likely spend:
- The first year: Securing new operating agreements.
- The second year: Investing in overhaul of infrastructure.
- The third year: Being able to boost output.
This suggests an rise of around 500,000 barrels per day maybe by the end of the decade.
Appetite Compared to Appetite for Spending
Experts make a important separation between companies' curiosity and their willingness to spend significantly.
“I think their interest is an high score, on a range of ten. However, their appetite is a much lower, because there is a lack of certainty yet.”
Veteran operators in the sector reinforce this view. The expectation is that majors will politically express enthusiasm while privately proceeding with deliberate slowness.
The Colossal Price Tag
The financial bill would be colossal. University analysis suggest that adding between half a million and a million barrels per day would require more than $10 billion in funding over two to three years.
But, rebuilding production to previous levels of around 2.5 million bpd could require a monumental $80 billion to $90 billion over many more years.
The Outstanding Issue of Federal Guarantees
The idea of oil giants being compensated by the government has been often raised. But, specific plans on any guarantee have not yet been forthcoming.
This lack of certainty is the main factor behind the industry's hesitation. Companies seek guarantees against political risk and the chance that a different administration could refuse any promise.
“It is essential to be insured against sovereign risk, that we’ve experienced in Venezuela before.”
Therefore, while political promises runs high, the operational risks suggest a path of extreme caution for potential major financial commitment in the Venezuelan energy industry.
