Market specialists have expressed deep skepticism regarding recent claims that US large firms will rapidly invest tens of billions of dollars to revive Venezuela's crumbling oil infrastructure.
Demand for Absolute Protections
Lacking an “iron-clad guarantee” of financial backing from the Washington, experts believe multinational oil companies to proceed with significant hesitation.
“It is premature to discuss any upcoming plans,” an official commented this weekend.
The ambitious timeframe of less than 18 months has been boldly suggested. Yet, expert analyses suggest a different picture.
A More Realistic Outlook
“Chances are going to take 36 months for any meaningful output increase,” said one energy analyst.
Experts believe operators would likely spend:
- The first year: Navigating new operating agreements.
- The second year: Beginning rebuilding of infrastructure.
- Year three: Reaching a position to meaningfully increase output.
This suggests an rise of around half a million bpd maybe by the end of the decade.
Appetite Compared to Appetite for Risk
Experts make a key distinction between companies' curiosity and their willingness to spend significantly.
“In my view their attention is an eight, on a range of ten. I think their readiness is a mid-range score, because there is no clarity yet.”
Seasoned operators in the sector echo this view. The expectation is that firms will politically call it fantastic while actually proceeding with deliberate slowness.
The Vast Investment Required
The financial outlay would be vast. Research analysis suggest that adding between half a million and a million barrels per day would require in excess of $10 billion in investment over several years.
Yet, rebuilding production to peak levels of around 2.5 million bpd could require a monumental $80 billion to $90 billion over six or seven years.
The Pending Question of Government Backing
The suggestion of oil giants being paid back by the federal government has been often floated. However, concrete details on such a mechanism have not yet been forthcoming.
Without certainty is the main factor behind the industry's caution. Companies seek protection against nationalization and the risk that a subsequent government could refuse any agreement.
“It is essential to be insured against sovereign risk, that we’ve experienced in Venezuela before.”
Ultimately, while political promises runs strong, the operational risks suggest a path of measured steps for potential significant financial commitment in the country's oil sector.
