Energy analysts have expressed deep doubt regarding optimistic claims that US energy majors will quickly invest vast sums of dollars to fix Venezuela's dilapidated oil infrastructure.
Demand for Solid Protections
Absent an solid promise of financial backing from the American government, analysts expect international firms to move with extreme caution.
“It would be premature to comment on any potential investments,” a representative commented recently.
The optimistic timeline of less than 18 months was boldly outlined. However, expert analyses indicate a different picture.
A More Realistic Schedule
“It’s probably going to take 36 months for any kind of output increase,” commented one chief investment officer.
Experts believe operators would likely spend:
- Initial phase: Securing new government and security contracts.
- Year two: Commencing overhaul of facilities.
- Final phase: Starting to boost yield.
The result could be an rise of around 500,000 bpd possibly by the end of the decade.
Interest vs. Appetite for Risk
Analysts draw a key distinction between companies' curiosity and their appetite to invest heavily.
“In my view their interest is an high score, on a range of ten. But their willingness is a mid-range score, because there is significant uncertainty yet.”
Seasoned observers in the country reinforce this view. The expectation is that majors will publicly call it fantastic while privately proceeding with great care.
The Enormous Investment Required
The required outlay would be vast. Research estimates suggest that adding between 500,000 and a million barrels per day would require more than $10 billion in investment over several years.
However, returning production to previous levels of around 2.5 million barrels per day could require a staggering $80 billion to $90 billion over many more years.
The Unanswered Question of Federal Guarantees
The idea of oil giants being paid back by the US taxpayer has been repeatedly mentioned. Nevertheless, specific plans on any guarantee have so far not been forthcoming.
Without clarity is the key reason for the industry's reluctance. Operators seek protection against political risk and the chance that a different administration could renege on any deal.
“You need to be insured against nationalization, that we’ve experienced in Venezuela previously.”
Therefore, while rhetorical confidence runs high, the practical challenges suggest a journey of slow deliberation for potential large-scale investment in the country's oil sector.
