Industry experts have shown significant caution regarding optimistic statements that US oil giants will quickly pump tens of billions of dollars to fix the country's broken oil infrastructure.
Requirement of Absolute Protections
Absent an solid promise of complete repayment from the Washington, experts believe multinational oil companies to proceed with significant hesitation.
“It is hasty to discuss any upcoming plans,” an official said recently.
The optimistic timeline of less than a year and a half was boldly suggested. Nevertheless, industry projections indicate a longer timeline.
A More Realistic Schedule
“Chances are going to take 36 months for any significant output increase,” noted an industry expert.
The analysis indicates energy firms would likely spend:
- Year one: Navigating new government and security contracts.
- Year two: Investing in reconstruction of infrastructure.
- The third year: Starting to boost production.
The result could be an rise of around half a million bpd possibly by the end of the decade.
Appetite Compared to Readiness for Investment
Experts make a important separation between companies' curiosity and their appetite to invest substantially.
“I think their curiosity is an high score, on a scale of one to 10. But their appetite is a mid-range score, because there is significant uncertainty yet.”
Veteran observers in the sector echo this view. The thinking is that firms will politically call it fantastic while actually acting with deliberate slowness.
The Enormous Cost
The financial investment would be vast. Research estimates suggest that increasing production by between 500,000 and a million barrels per day would require in excess of $10 billion in funding over two to three years.
However, restoring production to peak levels of around 2.5 million barrels per day could require a monumental $80 billion to $90 billion over six or seven years.
The Outstanding Issue of Taxpayer Funding
The idea of energy companies being compensated by the US taxpayer has been often floated. Nevertheless, specific plans on any guarantee have not yet been provided.
Without a solid plan is the main reason for the sector's reluctance. Operators seek protection against political risk and the possibility that a future president could cancel any agreement.
“It is essential to be protected from political change, that we’ve seen in Venezuela previously.”
Ultimately, while political confidence runs high, the practical realities suggest a path of measured steps for any large-scale investment in the Venezuelan energy industry.
