Industry experts have expressed considerable skepticism regarding optimistic statements that US oil giants will quickly pump tens of billions of dollars to revive Venezuela's broken production facilities.
The Need for Solid Guarantees
Lacking an “iron-clad guarantee” of financial backing from the Washington, specialists predict multinational oil companies to act with significant hesitation.
“It would be too early to speculate on any upcoming plans,” a spokesperson said recently.
The aggressive timeframe of less than 18 months was publicly proposed. Nevertheless, realistic assessments suggest a different picture.
A Probable Outlook
“Chances are going to take three years for any kind of output increase,” noted one industry expert.
Experts believe energy firms would likely spend:
- Year one: Securing new government and security contracts.
- Year two: Beginning overhaul of infrastructure.
- The third year: Being able to boost production.
The result could be an increase of around 500,000 bpd perhaps by the end of the decade.
Appetite Compared to Willingness for Risk
Experts make a important separation between firms' attention and their appetite to invest significantly.
“In my view their curiosity is an high score, on a scale of ten. However, their readiness is a much lower, because there is a lack of certainty yet.”
Experienced diplomats in the sector reinforce this view. They believe that firms will publicly call it fantastic while actually acting with extreme caution.
The Vast Investment Required
The financial investment would be vast. Independent estimates suggest that adding between 500,000 and a million bpd would require more than $10 billion in capital spending over two to three years.
Yet, returning production to peak levels of around 2.5 million bpd could require a massive $80 billion to $90 billion over six or seven years.
The Unanswered Issue of Federal Guarantees
The suggestion of energy companies being reimbursed by the federal government has been repeatedly mentioned. But, specific plans on any guarantee have so far not been provided.
Without clarity is the key impediment for the sector's hesitation. Companies seek safeguards against sovereign risk and the chance that a future government could refuse any deal.
“They must be insured against political change, that we’ve experienced in Venezuela previously.”
Ultimately, while political optimism runs strong, the operational realities suggest a road of slow deliberation for any major investment in the country's oil sector.