Industry experts have shown considerable skepticism regarding recent claims that American energy majors will quickly invest billions of dollars to rebuild the country's dilapidated production facilities.
Demand for Iron-Clad Guarantees
Absent an absolute assurance of complete repayment from the Washington, specialists predict multinational oil companies to move with great care.
“It is too early to speculate on any potential investments,” a representative said in response.
The aggressive timeframe of under 18 months has been publicly suggested. Nevertheless, expert analyses indicate a different picture.
A Likely Timeline
“It’s probably going to take three years for any significant recovery in production,” said one energy analyst.
Experts believe operators would likely spend:
- Year one: Sorting through new government and security contracts.
- Year two: Commencing overhaul of facilities.
- The third year: Being able to significantly ramp up production.
The result could be an boost of around 500,000 barrels per day perhaps by the end of the decade.
Appetite Compared to Readiness for Investment
There is a critical difference between firms' attention and their willingness to spend significantly.
“I believe their attention is an eight, on a range of one to 10. But their appetite is a four or five, because there is significant uncertainty yet.”
Experienced operators in the sector share this view. The expectation is that majors will publicly express enthusiasm while privately moving with great care.
The Vast Cost
The required outlay would be enormous. Research projections suggest that increasing production by between half a million and a million barrels per day would require in excess of $10 billion in capital spending over several years.
Yet, rebuilding output to peak levels of around 2.5 million bpd could require a staggering $80 billion to $90 billion over six or seven years.
The Pending Issue of Taxpayer Funding
The suggestion of firms being reimbursed by the US taxpayer has been repeatedly mentioned. But, specific plans on this proposal have so far not been provided.
Without clarity is the main impediment for the industry's hesitation. Firms seek safeguards against political risk and the risk that a different president could renege on any promise.
“They must be protected from political change, that we’ve seen in Venezuela already.”
Therefore, while rhetorical optimism runs high, the financial realities suggest a road of measured steps for potential major financial commitment in the Venezuelan oil sector.
