Industry experts have expressed deep doubt regarding recent predictions that American energy majors will quickly invest tens of billions of dollars to fix the country's dilapidated energy sector.
Requirement of Solid Protections
Without an solid promise of financial backing from the US federal government, analysts expect global energy giants to move with extreme caution.
“It would be too early to discuss any future business activities,” a spokesperson commented recently.
The ambitious timeframe of less than 18 months has been publicly suggested. Nevertheless, expert analyses paint a longer timeline.
A Probable Schedule
“It is likely going to take three years for any significant output increase,” commented one industry expert.
The analysis indicates operators would likely spend:
- Year one: Sorting through new government and security contracts.
- Following phase: Beginning reconstruction of infrastructure.
- Final phase: Being able to significantly ramp up production.
This suggests an increase of around 500,000 barrels per day maybe by the end of the decade.
Interest vs. Willingness for Spending
Experts make a key distinction between firms' attention and their readiness to commit substantially.
“In my view their curiosity is an high score, on a range of ten. I think their readiness is a four or five, because there is a lack of certainty yet.”
Seasoned operators in the sector echo this view. The thinking is that companies will politically express enthusiasm while actually moving with great care.
The Vast Investment Required
The monetary outlay would be vast. Research estimates suggest that increasing production by between half a million and a million bpd would require over $10 billion in funding over two to three years.
Yet, rebuilding output to peak levels of around 2.5 million bpd could require a massive $80 billion to $90 billion over six or seven years.
The Unanswered Question of Taxpayer Funding
The prospect of oil giants being compensated by the government has been repeatedly raised. However, specific plans on any guarantee have not yet been announced.
Without certainty is the key factor for the industry's hesitation. Companies seek guarantees against sovereign risk and the risk that a future administration could cancel any agreement.
“They must be insured against sovereign risk, that we’ve witnessed in Venezuela previously.”
Ultimately, while rhetorical confidence runs high, the practical risks suggest a journey of measured steps for potential major venture in the Venezuelan energy industry.
