Market specialists have voiced deep caution regarding recent statements that US oil giants will quickly commit tens of billions of dollars to revive Venezuela's crumbling energy sector.
Requirement of Absolute Assurances
Absent an solid promise of complete repayment from the US federal government, experts believe global energy giants to move with great care.
“It is hasty to speculate on any potential investments,” a representative stated recently.
The optimistic schedule of less than a year and a half has been publicly proposed. However, expert analyses paint a longer timeline.
A Likely Outlook
“It is likely going to take multiple years for any kind of output increase,” said one energy analyst.
Experts believe energy firms would likely spend:
- The first year: Securing new operating agreements.
- Following phase: Investing in rebuilding of infrastructure.
- Final phase: Being able to meaningfully increase yield.
The result could be an rise of around 500,000 barrels per day maybe by the end of the decade.
Appetite Compared to Willingness for Risk
Experts make a critical difference between firms' attention and their willingness to spend heavily.
“I believe their attention is an eight, on a range of ten. However, their appetite is a mid-range score, because there is a lack of certainty yet.”
Experienced diplomats in the region echo this view. They believe that majors will publicly express enthusiasm while privately proceeding with extreme caution.
The Vast Investment Required
The monetary outlay would be enormous. Research analysis suggest that adding between 500,000 and a million barrels per day would require more than $10 billion in funding over two to three years.
But, returning production to previous levels of around 2.5 million bpd could require a massive $80 billion to $90 billion over six or seven years.
The Unanswered Issue of Taxpayer Funding
The idea of energy companies being reimbursed by the federal government has been repeatedly floated. However, specific plans on any guarantee have so far not been forthcoming.
The absence of a solid plan is the primary reason for the industry's reluctance. Operators seek guarantees against political risk and the chance that a different president could cancel any deal.
“They must be protected from political change, that we’ve witnessed in Venezuela previously.”
In summary, while political promises runs high, the operational risks suggest a road of extreme caution for potential large-scale venture in the Venezuelan oil sector.
