Energy analysts have voiced considerable skepticism regarding bullish predictions that American energy majors will quickly pump tens of billions of dollars to fix Venezuela's dilapidated oil infrastructure.
The Need for Solid Protections
Without an solid promise of financial backing from the Washington, specialists predict global energy giants to move with great care.
“It seems hasty to discuss any upcoming plans,” a spokesperson said in response.
The optimistic timeframe of less than 18 months has been boldly suggested. Yet, realistic assessments paint a different picture.
A More Realistic Outlook
“Chances are going to take 36 months for any significant production bounce,” said one industry expert.
Experts believe operators would likely spend:
- The first year: Securing new government and security contracts.
- Following phase: Commencing overhaul of facilities.
- Year three: Being able to significantly ramp up production.
This suggests an increase of around 500,000 bpd possibly by the end of the decade.
Appetite Compared to Willingness for Spending
Experts make a important separation between multinationals’ interest and their readiness to commit heavily.
“In my view their attention is an high score, on a scale of one to 10. However, their appetite is a much lower, because there is no clarity yet.”
Experienced diplomats in the country reinforce this caution. The expectation is that companies will publicly call it fantastic while actually moving with great care.
The Colossal Price Tag
The required investment would be colossal. University analysis suggest that adding between half a million and a million bpd would require in excess of $10 billion in capital spending over several years.
Yet, returning output to historical levels of around 2.5 million bpd could require a massive $80 billion to $90 billion over six or seven years.
The Outstanding Question of Taxpayer Funding
The suggestion of oil giants being paid back by the US taxpayer has been often mentioned. Nevertheless, formal assurances on this proposal have so far not been forthcoming.
The absence of clarity is the main impediment behind the sector's hesitation. Firms seek protection against sovereign risk and the possibility that a subsequent president could cancel any agreement.
“You need to be shielded from sovereign risk, that we’ve seen in Venezuela previously.”
Ultimately, while rhetorical optimism runs high, the practical risks suggest a journey of slow deliberation for potential large-scale venture in the country's energy industry.
