Industry experts have voiced significant doubt regarding optimistic predictions that American oil giants will quickly invest tens of billions of dollars to fix the country's dilapidated production facilities.
Demand for Iron-Clad Assurances
Lacking an absolute assurance of full reimbursement from the Washington, experts believe international firms to proceed with extreme caution.
“It would be too early to comment on any potential investments,” a representative said this weekend.
The ambitious timeline of under a year and a half was publicly outlined. However, expert analyses paint a more cautious outlook.
A Likely Timeline
“It is likely going to take multiple years for any meaningful output increase,” said one chief investment officer.
Experts believe energy firms would likely spend:
- Initial phase: Sorting through new regulatory frameworks.
- Year two: Commencing reconstruction of facilities.
- The third year: Starting to meaningfully increase output.
This would lead to an increase of around half a million barrels per day perhaps by the end of the decade.
Appetite Compared to Readiness for Risk
Experts make a key distinction between firms' attention and their willingness to spend substantially.
“I think their interest is an eight, on a scale of ten. I think their willingness is a four or five, because there is a lack of certainty yet.”
Veteran operators in the country echo this caution. The expectation is that firms will politically express enthusiasm while privately moving with deliberate slowness.
The Enormous Cost
The financial outlay would be enormous. Research analysis suggest that increasing production by between half a million and a million barrels per day would require in excess of $10 billion in capital spending over two to three years.
However, returning output to previous levels of around 2.5 million bpd could require a staggering $80 billion to $90 billion over six or seven years.
The Unanswered Question of Government Backing
The idea of energy companies being reimbursed by the US taxpayer has been repeatedly mentioned. But, specific plans on such a mechanism have not yet been provided.
The absence of clarity is the key impediment behind the sector's reluctance. Companies seek guarantees against political risk and the chance that a future administration could cancel any deal.
“It is essential to be insured against sovereign risk, that we’ve experienced in Venezuela already.”
Ultimately, while rhetorical confidence runs high, the operational challenges suggest a road of measured steps for any significant venture in the Venezuelan oil sector.
