Industry experts have shown deep skepticism regarding bullish claims that US large firms will rapidly invest vast sums of dollars to fix the country's broken production facilities.
Requirement of Absolute Protections
Lacking an solid promise of financial backing from the US federal government, analysts expect global energy giants to act with extreme caution.
“It is premature to discuss any upcoming plans,” an official said in response.
The ambitious timeline of under a year and a half was publicly proposed. Nevertheless, realistic assessments paint a longer timeline.
A Likely Schedule
“It is likely going to take multiple years for any meaningful recovery in production,” noted one energy analyst.
The analysis indicates energy firms would likely spend:
- Year one: Sorting through new operating agreements.
- Year two: Beginning reconstruction of equipment.
- Year three: Being able to significantly ramp up output.
This suggests an boost of around 500,000 bpd possibly by the end of the decade.
Appetite Compared to Willingness for Spending
Experts make a critical difference between multinationals’ interest and their appetite to invest substantially.
“I believe their interest is an high score, on a scale of one to 10. But their appetite is a mid-range score, because there is significant uncertainty yet.”
Experienced operators in the country share this view. The thinking is that majors will publicly express enthusiasm while privately moving with deliberate slowness.
The Enormous Cost
The required outlay would be vast. Independent estimates suggest that increasing production by between half a million and a million barrels per day would require in excess of $10 billion in funding over several years.
However, restoring output to historical levels of around 2.5 million bpd could require a massive $80 billion to $90 billion over many more years.
The Pending Issue of Government Backing
The suggestion of oil giants being reimbursed by the US taxpayer has been often raised. But, concrete details on such a mechanism have not yet been provided.
The absence of clarity is the key impediment for the industry's reluctance. Companies seek protection against sovereign risk and the possibility that a subsequent president could refuse any agreement.
“You need to be protected from nationalization, that we’ve witnessed in Venezuela before.”
Therefore, while political confidence runs high, the operational risks suggest a journey of slow deliberation for any major investment in the Venezuelan oil sector.
