Market specialists have voiced deep doubt regarding recent statements that US energy majors will swiftly invest billions of dollars to revive the country's broken oil infrastructure.
The Need for Solid Guarantees
Without an absolute assurance of full reimbursement from the Washington, experts believe multinational oil companies to act with extreme caution.
“It would be premature to discuss any future business activities,” an official stated this weekend.
The optimistic schedule of under a year and a half was boldly suggested. Yet, realistic assessments suggest a different picture.
A Likely Timeline
“It is likely going to take three years for any significant production bounce,” said an industry expert.
Experts believe operators would likely spend:
- The first year: Navigating new operating agreements.
- The second year: Commencing rebuilding of equipment.
- The third year: Reaching a position to meaningfully increase yield.
The result could be an boost of around 500,000 bpd perhaps by 2029.
Appetite Compared to Appetite for Investment
Analysts draw a critical difference between companies' curiosity and their readiness to commit significantly.
“I believe their interest is an eight, on a scale of one to 10. However, their appetite is a mid-range score, because there is a lack of certainty yet.”
Seasoned diplomats in the region echo this sentiment. The thinking is that companies will publicly talk up the opportunity while actually acting with great care.
The Enormous Price Tag
The required outlay would be enormous. Research analysis suggest that adding between half a million and a million barrels per day would require in excess of $10 billion in funding over two to three years.
However, 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 Taxpayer Funding
The idea of energy companies being compensated by the US taxpayer has been repeatedly raised. However, specific plans on any guarantee have so far not been announced.
This lack of certainty is the primary reason behind the industry's reluctance. Firms seek protection against sovereign risk and the chance that a future government could refuse any agreement.
“They must be shielded from sovereign risk, that we’ve seen in Venezuela already.”
Therefore, while political confidence runs high, the financial realities suggest a road of slow deliberation for any major investment in the Venezuelan oil sector.
