Industry experts have shown considerable doubt regarding recent claims that American large firms will rapidly commit vast sums of dollars to fix Venezuela's broken production facilities.
The Need for Solid Guarantees
Lacking an absolute assurance of full reimbursement from the Washington, experts believe multinational oil companies to act with extreme caution.
“It is premature to comment on any future business activities,” an official commented this weekend.
The ambitious timeline of under 18 months was boldly proposed. Yet, expert analyses indicate a different picture.
A Likely Timeline
“It is likely going to take multiple years for any kind of output increase,” commented an energy analyst.
He suggested oil companies would likely spend:
- Year one: Navigating new operating agreements.
- Following phase: Investing in reconstruction of facilities.
- Final phase: Being able to significantly ramp up production.
This would lead to an boost of around 500,000 barrels per day possibly by the end of the decade.
Interest vs. Readiness for Risk
Experts make a critical difference between companies' curiosity and their readiness to commit heavily.
“In my view their interest is an high score, on a range of ten. But their readiness is a four or five, because there is a lack of certainty yet.”
Experienced diplomats in the country share this caution. The thinking is that majors will publicly express enthusiasm while privately proceeding with great care.
The Vast Price Tag
The monetary investment would be enormous. University projections suggest that increasing production by between 500,000 and a million bpd would require over $10 billion in funding over two to three years.
However, returning output to peak levels of around 2.5 million bpd could require a monumental $80 billion to $90 billion over six or seven years.
The Outstanding Issue of Taxpayer Funding
The suggestion of firms being reimbursed by the federal government has been repeatedly mentioned. But, specific plans on any guarantee have not yet been announced.
Without clarity is the main impediment behind the sector's hesitation. Operators seek safeguards against nationalization and the chance that a subsequent administration could renege on any agreement.
“It is essential to be protected from political change, that we’ve experienced in Venezuela before.”
Ultimately, while political promises runs strong, the financial risks suggest a journey of measured steps for potential major investment in the Venezuelan energy industry.
