Market specialists have voiced considerable doubt regarding bullish claims that US energy majors will swiftly invest vast sums of dollars to rebuild Venezuela's broken oil infrastructure.
Demand for Solid Guarantees
Absent an absolute assurance of financial backing from the Washington, analysts expect global energy giants to proceed with extreme caution.
“It would be hasty to comment on any upcoming plans,” a representative said recently.
The aggressive schedule of less than a year and a half has been boldly suggested. Nevertheless, realistic assessments paint a different picture.
A Probable Outlook
“It’s probably going to take 36 months for any meaningful recovery in production,” said one chief investment officer.
Experts believe energy firms would likely spend:
- The first year: Sorting through new government and security contracts.
- Following phase: Investing in overhaul of infrastructure.
- Final phase: Being able to meaningfully increase output.
The result could be an rise of around 500,000 bpd maybe by the end of the decade.
Appetite Compared to Readiness for Risk
There is a critical difference between firms' attention and their readiness to commit significantly.
“I think their interest is an eight, on a scale of one to 10. I think their appetite is a much lower, because there is significant uncertainty yet.”
Seasoned observers in the region reinforce this view. The expectation is that companies will politically call it fantastic while actually proceeding with deliberate slowness.
The Enormous Price Tag
The monetary bill would be colossal. Independent analysis suggest that increasing production by between half a million and a million barrels per day would require more than $10 billion in funding over several years.
However, rebuilding output to peak levels of around 2.5 million barrels per day could require a staggering $80 billion to $90 billion over many more years.
The Pending Question of Taxpayer Funding
The idea of oil giants being compensated by the government has been often mentioned. However, concrete details on this proposal have so far not been provided.
The absence of a solid plan is the main factor for the industry's hesitation. Companies seek guarantees against sovereign risk and the risk that a future administration could cancel any promise.
“You need to be protected from sovereign risk, that we’ve seen in Venezuela already.”
Ultimately, while political optimism runs high, the operational realities suggest a road of extreme caution for potential large-scale venture in the Venezuelan energy industry.
