Energy analysts have expressed deep doubt regarding optimistic claims that US energy majors will rapidly commit tens of billions of dollars to revive the country's dilapidated oil infrastructure.
Demand for Solid Guarantees
Absent an absolute assurance of financial backing from the US federal government, analysts expect multinational oil companies to proceed with extreme caution.
“It would be hasty to comment on any future business activities,” a spokesperson said in response.
The optimistic schedule of under a year and a half was boldly outlined. Yet, realistic assessments indicate a different picture.
A Probable Schedule
“Chances are going to take 36 months for any kind of production bounce,” noted one industry expert.
The analysis indicates oil companies would likely spend:
- The first year: Securing new government and security contracts.
- The second year: Investing in overhaul of facilities.
- Final phase: Starting to boost output.
The result could be an increase of around half a million barrels per day perhaps by late 2028.
Appetite Compared to Willingness for Risk
Experts make a critical difference between firms' attention and their appetite to invest heavily.
“In my view their curiosity is an eight, on a scale of ten. But their readiness is a mid-range score, because there is a lack of certainty yet.”
Experienced observers in the country share this view. The expectation is that majors will politically express enthusiasm while actually acting with great care.
The Enormous Investment Required
The financial investment would be colossal. Research estimates suggest that adding between 500,000 and a million barrels per day would require more than $10 billion in capital spending over two to three years.
But, returning production to historical levels of around 2.5 million bpd could require a staggering $80 billion to $90 billion over many more years.
The Unanswered Question of Government Backing
The idea of firms being compensated by the federal government has been often floated. Nevertheless, specific plans on any guarantee have not yet been forthcoming.
This lack of certainty is the main impediment for the industry's caution. Companies seek guarantees against political risk and the risk that a subsequent administration could cancel any agreement.
“They must be shielded from sovereign risk, that we’ve witnessed in Venezuela before.”
In summary, while political promises runs strong, the financial realities suggest a journey of extreme caution for potential major investment in the Venezuelan energy industry.
