Industry experts have shown deep skepticism regarding optimistic predictions that US energy majors will rapidly commit vast sums of dollars to rebuild the country's dilapidated energy sector.
The Need for Solid Protections
Lacking an solid promise of financial backing from the Washington, experts believe multinational oil companies to proceed with great care.
“It is too early to speculate on any upcoming plans,” a spokesperson stated in response.
The ambitious schedule of less than 18 months has been publicly suggested. However, industry projections indicate a different picture.
A More Realistic Schedule
“It’s probably going to take three years for any significant recovery in production,” commented one energy analyst.
Experts believe operators would likely spend:
- Year one: Securing new operating agreements.
- Year two: Investing in rebuilding of equipment.
- Final phase: Being able to significantly ramp up yield.
The result could be an increase of around half a million bpd perhaps by the end of the decade.
Desire Versus Willingness for Risk
Experts make a key distinction between companies' curiosity and their willingness to spend significantly.
“I think their curiosity is an eight, on a scale of one to 10. However, their willingness is a four or five, because there is a lack of certainty yet.”
Veteran operators in the sector echo this sentiment. The thinking is that companies will politically talk up the opportunity while in practice moving with great care.
The Colossal Investment Required
The financial outlay would be colossal. University estimates suggest that adding between 500,000 and a million bpd would require in excess of $10 billion in investment over several years.
However, restoring output to peak levels of around 2.5 million bpd could require a monumental $80 billion to $90 billion over six or seven years.
The Outstanding Question of Taxpayer Funding
The idea of oil giants being reimbursed by the government has been often raised. However, concrete details on any guarantee have not yet been forthcoming.
Without certainty is the key reason behind the sector's caution. Firms seek protection against sovereign risk and the risk that a subsequent government could renege on any deal.
“You need to be insured against political change, that we’ve experienced in Venezuela before.”
Therefore, while political promises runs strong, the practical risks suggest a journey of measured steps for potential significant financial commitment in the Venezuelan energy industry.
