Industry experts have voiced deep skepticism regarding recent statements that US large firms will rapidly commit billions of dollars to fix Venezuela's dilapidated production facilities.
Demand for Absolute Protections
Without an absolute assurance of full reimbursement from the Washington, experts believe international firms to move with significant hesitation.
“It seems too early to comment on any potential investments,” a spokesperson said recently.
The aggressive schedule of under 18 months has been publicly outlined. Yet, expert analyses paint a different picture.
A Probable Timeline
“Chances are going to take multiple years for any kind of production bounce,” said an energy analyst.
He suggested oil companies would likely spend:
- The first year: Securing new operating agreements.
- The second year: Investing in rebuilding of equipment.
- Year three: Reaching a position to significantly ramp up output.
This would lead to an boost of around half a million barrels per day perhaps by the end of the decade.
Desire Versus Appetite for Investment
Analysts draw a important separation between companies' curiosity and their readiness to commit heavily.
“In my view their interest is an eight, on a scale of one to 10. But their willingness is a much lower, because there is significant uncertainty yet.”
Seasoned diplomats in the region echo this caution. The thinking is that companies will politically call it fantastic while privately proceeding with deliberate slowness.
The Enormous Cost
The monetary bill would be vast. Independent estimates suggest that adding between half a million and a million barrels per day would require over $10 billion in investment over two to three years.
However, returning production to historical levels of around 2.5 million barrels per day could require a staggering $80 billion to $90 billion over many more years.
The Pending Issue of Government Backing
The idea of energy companies being paid back by the government has been often floated. Nevertheless, formal assurances on any guarantee have not yet been forthcoming.
The absence of certainty is the main impediment behind the sector's hesitation. Operators seek protection against sovereign risk and the chance that a future government could refuse any agreement.
“You need to be insured against sovereign risk, that we’ve experienced in Venezuela before.”
In summary, while rhetorical optimism runs strong, the financial realities suggest a journey of measured steps for potential significant investment in the country's oil sector.
