Market specialists have expressed deep doubt regarding optimistic claims that US energy majors will quickly invest tens of billions of dollars to revive Venezuela's dilapidated production facilities.
Demand for Iron-Clad Guarantees
Without an solid promise of full reimbursement from the Washington, experts believe global energy giants to proceed with extreme caution.
“It seems hasty to comment on any potential investments,” an official said in response.
The aggressive timeframe of under 18 months was boldly suggested. Yet, industry projections indicate a longer timeline.
A More Realistic Outlook
“It is likely going to take three years for any meaningful output increase,” said an industry expert.
He suggested energy firms would likely spend:
- Initial phase: Sorting through new government and security contracts.
- Following phase: Commencing reconstruction of equipment.
- The third year: Being able to boost yield.
This would lead to an rise of around 500,000 bpd possibly by the end of the decade.
Desire Versus Appetite for Risk
Experts make a key distinction between firms' attention and their readiness to commit substantially.
“I believe their curiosity is an high score, on a scale of ten. However, their appetite is a much lower, because there is no clarity yet.”
Experienced diplomats in the sector share this view. They believe that majors will publicly talk up the opportunity while in practice moving with deliberate slowness.
The Enormous Price Tag
The monetary investment would be vast. Research projections suggest that increasing production by between 500,000 and a million bpd would require more than $10 billion in funding over two to three years.
Yet, returning output to previous levels of around 2.5 million bpd could require a monumental $80 billion to $90 billion over six or seven years.
The Pending Issue of Taxpayer Funding
The prospect of firms being paid back by the US taxpayer has been repeatedly raised. Nevertheless, specific plans on any guarantee have not yet been provided.
The absence of clarity is the primary factor for the industry's reluctance. Operators seek protection against political risk and the risk that a different government could renege on any deal.
“You need to be insured against nationalization, that we’ve witnessed in Venezuela already.”
Therefore, while political promises runs high, the financial realities suggest a path of measured steps for potential major venture in the country's energy industry.
