Industry experts have expressed deep doubt regarding bullish claims that American large firms will quickly invest tens of billions of dollars to rebuild Venezuela's broken production facilities.
Requirement of Solid Protections
Absent an absolute assurance of full reimbursement from the Washington, experts believe multinational oil companies to move with great care.
“It seems too early to speculate on any potential investments,” a representative said this weekend.
The ambitious schedule of less than 18 months was publicly outlined. Nevertheless, expert analyses suggest a longer timeline.
A More Realistic Timeline
“It’s probably going to take 36 months for any significant recovery in production,” noted one industry expert.
The analysis indicates oil companies would likely spend:
- Initial phase: Navigating new operating agreements.
- Year two: Commencing reconstruction of infrastructure.
- The third year: Reaching a position to significantly ramp up yield.
This would lead to an increase of around half a million bpd possibly by the end of the decade.
Appetite Compared to Appetite for Investment
Experts make a important separation between companies' curiosity and their appetite to invest significantly.
“I believe their attention is an high score, on a range of ten. But their readiness is a four or five, because there is significant uncertainty yet.”
Seasoned observers in the country echo this caution. The thinking is that firms will politically talk up the opportunity while privately moving with extreme caution.
The Colossal Price Tag
The monetary outlay would be enormous. University analysis suggest that adding between 500,000 and a million barrels per day would require more than $10 billion in investment over several years.
Yet, restoring production to peak levels of around 2.5 million barrels per day could require a monumental $80 billion to $90 billion over six or seven years.
The Outstanding Issue of Government Backing
The idea of energy companies being reimbursed by the federal government has been repeatedly mentioned. Nevertheless, specific plans on this proposal have not yet been provided.
Without clarity is the main reason behind the sector's hesitation. Operators seek protection against sovereign risk and the risk that a subsequent president could refuse any agreement.
“It is essential to be insured against political change, that we’ve seen in Venezuela already.”
In summary, while political promises runs high, the practical challenges suggest a path of slow deliberation for potential significant investment in the Venezuelan oil sector.
