Market specialists have voiced considerable skepticism regarding optimistic claims that American large firms will quickly invest tens of billions of dollars to revive Venezuela's crumbling energy sector.
The Need for Iron-Clad Protections
Absent an solid promise of full reimbursement from the Washington, analysts expect multinational oil companies to proceed with great care.
“It is too early to comment on any potential investments,” a representative stated this weekend.
The aggressive timeline of less than 18 months has been boldly proposed. Yet, expert analyses paint a longer timeline.
A Probable Schedule
“It is likely going to take 36 months for any kind of output increase,” commented an industry expert.
Experts believe energy firms would likely spend:
- The first year: Sorting through new government and security contracts.
- The second year: Beginning rebuilding of equipment.
- The third year: Being able to boost yield.
The result could be an increase of around half a million bpd perhaps by the end of the decade.
Desire Versus Readiness for Spending
Experts make a important separation between companies' curiosity and their appetite to invest heavily.
“I believe their curiosity is an eight, on a scale of one to 10. However, their appetite is a much lower, because there is significant uncertainty yet.”
Experienced observers in the sector share this view. They believe that majors will publicly express enthusiasm while privately acting with deliberate slowness.
The Vast Cost
The required investment would be vast. University projections 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 two to three years.
However, restoring output to peak levels of around 2.5 million bpd could require a massive $80 billion to $90 billion over many more years.
The Pending Question of Taxpayer Funding
The suggestion of energy companies being paid back by the federal government has been repeatedly mentioned. However, formal assurances on such a mechanism have so far not been announced.
Without a solid plan is the primary factor behind the sector's hesitation. Companies seek protection against sovereign risk and the chance that a subsequent government could refuse any agreement.
“They must be insured against nationalization, that we’ve witnessed in Venezuela before.”
In summary, while political promises runs strong, the operational realities suggest a journey of slow deliberation for any major investment in the Venezuelan oil sector.
