Market specialists have shown considerable caution regarding bullish predictions that American energy majors will quickly invest vast sums of dollars to revive Venezuela's dilapidated oil infrastructure.
Demand for Solid Assurances
Absent an solid promise of complete repayment from the American government, specialists predict multinational oil companies to move with great care.
“It is premature to comment on any future business activities,” a representative commented this weekend.
The ambitious schedule of less than a year and a half has been publicly outlined. Yet, expert analyses indicate a longer timeline.
A Probable Schedule
“Chances are going to take three years for any meaningful recovery in production,” noted one energy analyst.
He suggested oil companies would likely spend:
- Year one: Securing new operating agreements.
- Year two: Investing in rebuilding of infrastructure.
- The third year: Being able to significantly ramp up yield.
The result could be an increase of around half a million barrels per day maybe by the end of the decade.
Desire Versus Appetite for Spending
There is a critical difference between multinationals’ interest and their willingness to spend substantially.
“In my view their interest is an eight, on a range of one to 10. I think their willingness is a four or five, because there is a lack of certainty yet.”
Experienced operators in the region echo this caution. The expectation is that companies will politically talk up the opportunity while in practice acting with deliberate slowness.
The Enormous Cost
The financial bill would be vast. University estimates suggest that adding between half a million and a million bpd would require over $10 billion in funding over two to three years.
Yet, restoring production to peak levels of around 2.5 million barrels per day could require a staggering $80 billion to $90 billion over six or seven years.
The Outstanding Issue of Taxpayer Funding
The suggestion of energy companies being paid back by the US taxpayer has been repeatedly mentioned. But, specific plans on such a mechanism have not yet been forthcoming.
The absence of certainty is the primary factor behind the industry's hesitation. Operators seek safeguards against nationalization and the chance that a future government could refuse any promise.
“They must be protected from political change, that we’ve seen in Venezuela already.”
In summary, while political promises runs high, the practical challenges suggest a path of slow deliberation for potential major venture in the Venezuelan oil sector.
