Market specialists have expressed significant caution regarding optimistic claims that American oil giants will quickly invest vast sums of dollars to rebuild the country's crumbling energy sector.
Requirement of Absolute Guarantees
Absent an solid promise of full reimbursement from the Washington, experts believe international firms to act with extreme caution.
“It seems hasty to comment on any future business activities,” a spokesperson said this weekend.
The ambitious schedule of under 18 months has been boldly outlined. Nevertheless, industry projections indicate a more cautious outlook.
A More Realistic Timeline
“It is likely going to take three years for any kind of production bounce,” said one industry expert.
He suggested operators would likely spend:
- The first year: Navigating new operating agreements.
- The second year: Investing in overhaul of facilities.
- The third year: Reaching a position to boost production.
This suggests an rise of around 500,000 barrels per day maybe by 2029.
Appetite Compared to Willingness for Risk
There is a critical difference between companies' curiosity and their appetite to invest significantly.
“I think their curiosity is an eight, on a range of ten. I think their appetite is a mid-range score, because there is significant uncertainty yet.”
Seasoned operators in the region echo this view. The expectation is that majors will politically talk up the opportunity while in practice acting with great care.
The Colossal Cost
The financial investment would be vast. Research analysis suggest that increasing production by between half a million and a million bpd would require more than $10 billion in funding over two to three years.
However, restoring production to historical levels of around 2.5 million bpd could require a massive $80 billion to $90 billion over many more years.
The Pending Issue of Taxpayer Funding
The suggestion of energy companies being paid back by the US taxpayer has been repeatedly raised. But, formal assurances on such a mechanism have not yet been announced.
This lack of clarity is the main factor behind the industry's reluctance. Companies seek safeguards against sovereign risk and the chance that a different president could renege on any promise.
“You need to be protected from political change, that we’ve witnessed in Venezuela before.”
Therefore, while political promises runs high, the practical realities suggest a road of extreme caution for any significant investment in the Venezuelan energy industry.
