Market specialists have expressed deep caution regarding recent statements that US energy majors will rapidly pump vast sums of dollars to fix Venezuela's crumbling production facilities.
Demand for Solid Guarantees
Absent an solid promise of financial backing from the Washington, specialists predict multinational oil companies to act with significant hesitation.
“It is too early to discuss any future business activities,” an official stated recently.
The ambitious schedule of under 18 months has been publicly proposed. Yet, realistic assessments suggest a different picture.
A Probable Schedule
“It is likely going to take multiple years for any significant recovery in production,” noted an industry expert.
The analysis indicates oil companies would likely spend:
- Initial phase: Sorting through new government and security contracts.
- The second year: Investing in overhaul of infrastructure.
- Year three: Reaching a position to significantly ramp up production.
This would lead to an increase of around 500,000 barrels per day maybe by the end of the decade.
Desire Versus Readiness for Spending
Experts make a critical difference between firms' attention and their readiness to commit significantly.
“In my view their interest is an eight, on a scale of ten. I think their appetite is a much lower, because there is a lack of certainty yet.”
Seasoned observers in the country echo this sentiment. The expectation is that firms will publicly talk up the opportunity while actually moving with deliberate slowness.
The Colossal Cost
The required outlay would be colossal. Research projections suggest that adding between 500,000 and a million barrels per day would require over $10 billion in funding over two to three years.
But, rebuilding production to previous levels of around 2.5 million bpd could require a massive $80 billion to $90 billion over six or seven years.
The Pending Question of Government Backing
The prospect of firms being reimbursed by the federal government has been often mentioned. But, specific plans on any guarantee have so far not been forthcoming.
Without a solid plan is the main factor behind the sector's hesitation. Companies seek protection against nationalization and the risk that a subsequent president could refuse any promise.
“You need to be shielded from nationalization, that we’ve witnessed in Venezuela previously.”
Therefore, while rhetorical promises runs high, the financial challenges suggest a journey of measured steps for any large-scale venture in the country's energy industry.
