Industry experts have shown deep doubt regarding recent claims that US energy majors will swiftly pump billions of dollars to revive Venezuela's dilapidated energy sector.
Requirement of Absolute Guarantees
Without an “iron-clad guarantee” of financial backing from the Washington, specialists predict multinational oil companies to proceed with great care.
“It is premature to speculate on any upcoming plans,” an official stated in response.
The ambitious timeframe of less than 18 months has been boldly proposed. Nevertheless, expert analyses indicate a different picture.
A More Realistic Schedule
“It’s probably going to take multiple years for any significant recovery in production,” noted an energy analyst.
Experts believe operators would likely spend:
- Year one: Securing new government and security contracts.
- Following phase: Beginning overhaul of infrastructure.
- The third year: Being able to boost yield.
This would lead to an boost of around 500,000 barrels per day maybe by the end of the decade.
Desire Versus Appetite for Spending
Experts make a key distinction between multinationals’ interest and their readiness to commit heavily.
“In my view their curiosity is an high score, on a range of one to 10. I think their readiness is a much lower, because there is a lack of certainty yet.”
Seasoned diplomats in the sector echo this sentiment. The thinking is that companies will politically express enthusiasm while in practice proceeding with great care.
The Colossal Investment Required
The required outlay would be colossal. University estimates suggest that increasing production by between 500,000 and a million barrels per day would require over $10 billion in funding over two to three years.
Yet, rebuilding output to historical levels of around 2.5 million bpd could require a monumental $80 billion to $90 billion over six or seven years.
The Outstanding Issue of Government Backing
The prospect of oil giants being compensated by the government has been repeatedly floated. However, formal assurances on such a mechanism have so far not been forthcoming.
Without certainty is the key reason for the sector's hesitation. Companies seek protection against sovereign risk and the chance that a subsequent government could refuse any deal.
“It is essential to be insured against political change, that we’ve experienced in Venezuela before.”
Ultimately, while political confidence runs strong, the operational risks suggest a road of slow deliberation for potential significant investment in the country's oil sector.
