Industry experts have voiced deep caution regarding optimistic claims that American large firms will swiftly commit tens of billions of dollars to fix the country's broken production facilities.
Requirement of Absolute Assurances
Without an absolute assurance of complete repayment from the Washington, experts believe international firms to move with great care.
“It would be hasty to discuss any upcoming plans,” an official said recently.
The optimistic timeframe of less than a year and a half has been boldly proposed. Nevertheless, expert analyses paint a different picture.
A Probable Outlook
“Chances are going to take three years for any significant production bounce,” said an industry expert.
Experts believe energy firms would likely spend:
- The first year: Sorting through new operating agreements.
- Year two: Investing in rebuilding of equipment.
- The third year: Starting to boost production.
This would lead to an rise of around half a million bpd perhaps by the end of the decade.
Appetite Compared to Willingness for Risk
There is a important separation between firms' attention and their appetite to invest substantially.
“I think their attention is an eight, on a range of ten. But their readiness is a much lower, because there is significant uncertainty yet.”
Veteran operators in the sector echo this sentiment. The thinking is that majors will politically talk up the opportunity while privately proceeding with deliberate slowness.
The Enormous Price Tag
The monetary bill would be enormous. Research projections suggest that increasing production by between 500,000 and a million barrels per day would require over $10 billion in investment over two to three years.
But, rebuilding output to historical levels of around 2.5 million bpd could require a monumental $80 billion to $90 billion over six or seven years.
The Unanswered Question of Taxpayer Funding
The suggestion of energy companies being compensated by the US taxpayer has been often raised. But, formal assurances on any guarantee have not yet been forthcoming.
This lack of a solid plan is the key impediment behind the industry's caution. Companies seek guarantees against sovereign risk and the risk that a different government could cancel any deal.
“They must be protected from political change, that we’ve witnessed in Venezuela before.”
Therefore, while rhetorical optimism runs high, the practical challenges suggest a road of extreme caution for any large-scale financial commitment in the Venezuelan energy industry.
