Energy analysts have shown significant skepticism regarding bullish claims that American oil giants will swiftly invest tens of billions of dollars to fix Venezuela's broken production facilities.
Requirement of Iron-Clad Guarantees
Without an absolute assurance of complete repayment from the US federal government, experts believe global energy giants to act with significant hesitation.
“It seems premature to discuss any potential investments,” an official stated this weekend.
The optimistic timeframe of less than a year and a half was boldly proposed. However, expert analyses indicate a more cautious outlook.
A More Realistic Schedule
“It’s probably going to take 36 months for any kind of production bounce,” commented an energy analyst.
Experts believe oil companies would likely spend:
- The first year: Sorting through new operating agreements.
- The second year: Investing in reconstruction of facilities.
- The third year: Starting to boost output.
This would lead to an increase of around half a million barrels per day perhaps by 2029.
Appetite Compared to Readiness for Risk
Analysts draw a critical difference between firms' attention and their readiness to commit substantially.
“I believe their interest is an eight, on a range of ten. But their readiness is a mid-range score, because there is a lack of certainty yet.”
Experienced operators in the region echo this caution. The thinking is that companies will publicly talk up the opportunity while privately acting with great care.
The Enormous Cost
The monetary bill would be colossal. Independent projections suggest that adding between half a million and a million barrels per day would require over $10 billion in capital spending over two to three years.
But, rebuilding production to historical levels of around 2.5 million barrels per day could require a monumental $80 billion to $90 billion over six or seven years.
The Pending Question of Government Backing
The suggestion of energy companies being compensated by the government has been often floated. Nevertheless, specific plans on such a mechanism have so far not been announced.
This lack of certainty is the primary reason behind the industry's hesitation. Operators seek protection against political risk and the risk that a subsequent administration could refuse any deal.
“It is essential to be insured against political change, that we’ve witnessed in Venezuela already.”
Ultimately, while rhetorical promises runs high, the operational risks suggest a path of measured steps for any major financial commitment in the country's oil sector.
