Industry experts have shown considerable doubt regarding optimistic predictions that American energy majors will rapidly pump vast sums of dollars to rebuild the country's broken production facilities.
The Need for Absolute Assurances
Absent an solid promise of financial backing from the Washington, experts believe multinational oil companies to move with extreme caution.
“It seems too early to comment on any future business activities,” an official said in response.
The optimistic timeframe of under 18 months was publicly outlined. Nevertheless, expert analyses paint a different picture.
A Likely Outlook
“Chances are going to take 36 months for any meaningful production bounce,” said one chief investment officer.
The analysis indicates energy firms would likely spend:
- Year one: Securing new operating agreements.
- Year two: Beginning rebuilding of facilities.
- Final phase: Starting to boost output.
The result could be an increase of around half a million bpd possibly by the end of the decade.
Interest vs. Readiness for Spending
Analysts draw a important separation between firms' attention and their appetite to invest substantially.
“I believe their attention is an eight, on a range of one to 10. But their appetite is a much lower, because there is no clarity yet.”
Experienced diplomats in the region echo this view. They believe that firms will politically call it fantastic while actually moving with deliberate slowness.
The Colossal Price Tag
The financial investment would be vast. Research estimates suggest that increasing production by between half a million and a million bpd would require more than $10 billion in investment over several years.
But, rebuilding output to historical levels of around 2.5 million bpd could require a staggering $80 billion to $90 billion over many more years.
The Pending Question of Taxpayer Funding
The prospect of firms being reimbursed by the government has been often mentioned. But, concrete details on such a mechanism have so far not been provided.
This lack of clarity is the key reason for the sector's reluctance. Companies seek protection against political risk and the possibility that a future president could refuse any deal.
“It is essential to be insured against sovereign risk, that we’ve witnessed in Venezuela before.”
Therefore, while political promises runs high, the practical realities suggest a journey of measured steps for any significant investment in the Venezuelan oil sector.
