Energy analysts have expressed considerable caution regarding recent statements that American energy majors will swiftly invest vast sums of dollars to rebuild Venezuela's crumbling production facilities.
Demand for Absolute Assurances
Lacking an absolute assurance of full reimbursement from the American government, specialists predict global energy giants to move with great care.
“It is premature to discuss any potential investments,” a spokesperson said in response.
The optimistic timeline of less than a year and a half has been boldly outlined. Nevertheless, industry projections indicate a more cautious outlook.
A More Realistic Timeline
“It is likely going to take three years for any kind of output increase,” commented one industry expert.
Experts believe energy firms would likely spend:
- Year one: Sorting through new regulatory frameworks.
- Following phase: Beginning rebuilding of infrastructure.
- Final phase: Starting to boost production.
This would lead to an boost of around half a million barrels per day perhaps by the end of the decade.
Appetite Compared to Readiness for Spending
There is a critical difference between companies' curiosity and their willingness to spend heavily.
“I think their curiosity is an high score, on a range of ten. I think their appetite is a four or five, because there is significant uncertainty yet.”
Veteran operators in the sector echo this sentiment. The thinking is that firms will publicly express enthusiasm while actually acting with extreme caution.
The Enormous Cost
The required outlay would be enormous. Independent analysis suggest that adding between 500,000 and a million barrels per day would require in excess of $10 billion in capital spending over several years.
Yet, returning output to previous levels of around 2.5 million barrels per day could require a staggering $80 billion to $90 billion over six or seven years.
The Outstanding Question of Taxpayer Funding
The idea of energy companies being paid back by the government has been often floated. However, specific plans on any guarantee have not yet been announced.
The absence of a solid plan is the primary reason behind the industry's caution. Operators seek protection against political risk and the risk that a different administration could refuse any promise.
“It is essential to be shielded from sovereign risk, that we’ve experienced in Venezuela before.”
Therefore, while rhetorical promises runs high, the operational challenges suggest a path of slow deliberation for potential large-scale venture in the country's oil sector.
