Industry experts have expressed significant skepticism regarding bullish predictions that US oil giants will swiftly commit tens of billions of dollars to fix Venezuela's crumbling production facilities.
Requirement of Absolute Guarantees
Lacking an “iron-clad guarantee” of complete repayment from the Washington, experts believe global energy giants to move with great care.
“It seems premature to speculate on any future business activities,” an official said this weekend.
The aggressive timeline of less than 18 months has been publicly outlined. However, industry projections indicate a longer timeline.
A More Realistic Outlook
“Chances are going to take 36 months for any kind of recovery in production,” commented one industry expert.
Experts believe energy firms would likely spend:
- The first year: Sorting through new operating agreements.
- The second year: Commencing rebuilding of facilities.
- The third year: Starting to meaningfully increase yield.
The result could be an rise of around half a million barrels per day perhaps by the end of the decade.
Desire Versus Readiness for Risk
Analysts draw a key distinction between companies' curiosity and their appetite to invest substantially.
“In my view their curiosity is an high score, on a range of ten. I think their willingness is a mid-range score, because there is significant uncertainty yet.”
Veteran operators in the sector echo this sentiment. They believe that companies will politically express enthusiasm while actually acting with great care.
The Colossal Price Tag
The financial outlay would be colossal. University projections suggest that increasing production by between 500,000 and a million barrels per day would require in excess of $10 billion in capital spending over several years.
But, rebuilding production to peak levels of around 2.5 million bpd could require a monumental $80 billion to $90 billion over six or seven years.
The Pending Question of Taxpayer Funding
The suggestion of firms being compensated by the US taxpayer has been repeatedly raised. Nevertheless, specific plans on any guarantee have not yet been forthcoming.
The absence of certainty is the key factor for the sector's hesitation. Operators seek protection against political risk and the possibility that a subsequent government could cancel any deal.
“It is essential to be insured against political change, that we’ve witnessed in Venezuela previously.”
Therefore, while rhetorical optimism runs strong, the operational risks suggest a road of measured steps for any large-scale investment in the country's oil sector.
