Industry experts have voiced significant caution regarding bullish claims that US energy majors will rapidly invest billions of dollars to revive Venezuela's dilapidated production facilities.
Requirement of Absolute Guarantees
Without an “iron-clad guarantee” of full reimbursement from the Washington, experts believe multinational oil companies to move with significant hesitation.
“It is premature to speculate on any potential investments,” a spokesperson said in response.
The aggressive timeframe of under 18 months was publicly proposed. However, expert analyses indicate a longer timeline.
A Likely Timeline
“Chances are going to take multiple years for any meaningful recovery in production,” commented an chief investment officer.
Experts believe operators would likely spend:
- The first year: Navigating new operating agreements.
- The second year: Commencing overhaul of equipment.
- Final phase: Being able to meaningfully increase production.
The result could be an rise of around 500,000 bpd maybe by 2029.
Desire Versus Willingness for Investment
Analysts draw a critical difference between companies' curiosity and their willingness to spend heavily.
“In my view their attention is an high score, on a scale of one to 10. However, their readiness is a mid-range score, because there is no clarity yet.”
Experienced observers in the country reinforce this view. They believe that companies will publicly talk up the opportunity while in practice acting with great care.
The Vast Price Tag
The required bill would be enormous. University analysis suggest that adding between 500,000 and a million bpd would require in excess of $10 billion in investment over several years.
However, rebuilding output to historical levels of around 2.5 million barrels per day could require a monumental $80 billion to $90 billion over six or seven years.
The Unanswered Question of Taxpayer Funding
The suggestion of firms being paid back by the government has been repeatedly raised. Nevertheless, formal assurances on any guarantee have so far not been provided.
Without a solid plan is the main reason for the industry's caution. Firms seek protection against sovereign risk and the possibility that a subsequent government could refuse any agreement.
“You need to be protected from nationalization, that we’ve seen in Venezuela previously.”
Therefore, while political promises runs high, the operational challenges suggest a path of slow deliberation for any major investment in the Venezuelan oil sector.
