Industry experts have shown deep doubt regarding bullish statements that US large firms will quickly invest billions of dollars to fix Venezuela's dilapidated oil infrastructure.
Requirement of Solid Guarantees
Absent an solid promise of financial backing from the US federal government, analysts expect global energy giants to act with extreme caution.
“It would be too early to comment on any future business activities,” an official said recently.
The ambitious schedule of less than 18 months has been boldly suggested. Yet, realistic assessments paint a different picture.
A More Realistic Outlook
“It is likely going to take three years for any meaningful recovery in production,” commented an industry expert.
He suggested energy firms would likely spend:
- Year one: Securing new government and security contracts.
- The second year: Investing in rebuilding of infrastructure.
- The third year: Being able to significantly ramp up yield.
This suggests an increase of around 500,000 barrels per day perhaps by 2029.
Appetite Compared to Readiness for Investment
Experts make a important separation between companies' curiosity and their willingness to spend substantially.
“I think their curiosity is an eight, on a scale of one to 10. However, their appetite is a much lower, because there is no clarity yet.”
Veteran diplomats in the sector echo this sentiment. They believe that companies will publicly talk up the opportunity while actually acting with extreme caution.
The Enormous Investment Required
The financial bill would be vast. Independent estimates suggest that adding between half a million and a million barrels per day would require more than $10 billion in funding over several years.
But, restoring production to peak levels of around 2.5 million barrels per day could require a massive $80 billion to $90 billion over many more years.
The Unanswered Issue of Taxpayer Funding
The idea of firms being paid back by the government has been often floated. But, specific plans on any guarantee have so far not been forthcoming.
This lack of certainty is the primary reason for the sector's hesitation. Operators seek guarantees against sovereign risk and the risk that a future government could renege on any promise.
“You need to be insured against sovereign risk, that we’ve seen in Venezuela previously.”
In summary, while political confidence runs high, the practical challenges suggest a road of measured steps for any significant financial commitment in the Venezuelan energy industry.
