Energy analysts have voiced considerable doubt regarding recent predictions that US energy majors will swiftly commit billions of dollars to rebuild Venezuela's dilapidated energy sector.
Demand for Absolute Guarantees
Absent an “iron-clad guarantee” of full reimbursement from the Washington, analysts expect global energy giants to act with extreme caution.
“It would be premature to comment on any upcoming plans,” a representative commented this weekend.
The ambitious timeline of less than a year and a half has been publicly suggested. However, industry projections indicate a more cautious outlook.
A More Realistic Schedule
“It is likely going to take 36 months for any meaningful recovery in production,” noted one industry expert.
Experts believe operators would likely spend:
- The first year: Securing new operating agreements.
- Year two: Beginning overhaul of equipment.
- Final phase: Being able to significantly ramp up production.
This would lead to an boost of around half a million bpd maybe by the end of the decade.
Appetite Compared to Willingness for Investment
Analysts draw a critical difference between multinationals’ interest and their readiness to commit substantially.
“I believe their interest is an eight, on a range of ten. However, their readiness is a mid-range score, because there is no clarity yet.”
Veteran operators in the region share this view. They believe that companies will publicly call it fantastic while actually proceeding with great care.
The Vast Cost
The required outlay would be colossal. University analysis suggest that adding between half a million and a million bpd would require more than $10 billion in capital spending over two to three years.
Yet, returning production to historical levels of around 2.5 million bpd could require a staggering $80 billion to $90 billion over many more years.
The Unanswered Issue of Federal Guarantees
The idea of oil giants being reimbursed by the US taxpayer has been repeatedly mentioned. However, formal assurances on this proposal have so far not been forthcoming.
This lack of clarity is the primary factor behind the sector's reluctance. Operators seek guarantees against sovereign risk and the chance that a different president could cancel any deal.
“You need to be shielded from political change, that we’ve seen in Venezuela previously.”
Ultimately, while political confidence runs strong, the financial risks suggest a journey of measured steps for potential significant venture in the Venezuelan oil sector.
