Market specialists have shown deep caution regarding recent predictions that US energy majors will swiftly invest tens of billions of dollars to fix the country's dilapidated production facilities.
Requirement of Absolute Assurances
Lacking an solid promise of full reimbursement from the Washington, specialists predict international firms to act with significant hesitation.
“It seems premature to speculate on any potential investments,” an official commented in response.
The ambitious timeframe of less than 18 months has been boldly proposed. Yet, realistic assessments indicate a more cautious outlook.
A More Realistic Schedule
“It’s probably going to take multiple years for any kind of output increase,” commented one industry expert.
Experts believe energy firms would likely spend:
- Initial phase: Sorting through new operating agreements.
- Year two: Investing in overhaul of facilities.
- The third year: Reaching a position to boost yield.
The result could be an boost of around half a million barrels per day possibly by the end of the decade.
Appetite Compared to Willingness for Risk
Analysts draw a critical difference between firms' attention and their readiness to commit heavily.
“I think their attention is an high score, on a range of one to 10. But their readiness is a four or five, because there is a lack of certainty yet.”
Experienced operators in the sector share this view. They believe that companies will publicly talk up the opportunity while actually proceeding with deliberate slowness.
The Vast Cost
The required bill would be vast. Research estimates suggest that increasing production by between half a million and a million barrels per day would require in excess of $10 billion in investment over several years.
Yet, returning production to historical levels of around 2.5 million barrels per day could require a staggering $80 billion to $90 billion over six or seven years.
The Unanswered Question of Federal Guarantees
The idea of firms being paid back by the US taxpayer has been often floated. Nevertheless, concrete details on such a mechanism have not yet been forthcoming.
Without clarity is the key factor behind the industry's hesitation. Operators seek protection against sovereign risk and the chance that a different government could refuse any promise.
“You need to be insured against political change, that we’ve experienced in Venezuela already.”
In summary, while political confidence runs strong, the operational realities suggest a journey of extreme caution for potential significant financial commitment in the Venezuelan oil sector.
