Energy analysts have expressed deep skepticism regarding bullish claims that US energy majors will rapidly pump tens of billions of dollars to fix the country's broken oil infrastructure.
The Need for Absolute Assurances
Without an “iron-clad guarantee” of full reimbursement from the Washington, analysts expect global energy giants to act with significant hesitation.
“It is too early to speculate on any future business activities,” a spokesperson commented this weekend.
The optimistic timeline of less than a year and a half has been boldly proposed. However, industry projections paint a longer timeline.
A More Realistic Timeline
“It is likely going to take multiple years for any meaningful production bounce,” commented an chief investment officer.
Experts believe operators would likely spend:
- Initial phase: Securing new government and security contracts.
- Following phase: Commencing reconstruction of equipment.
- The third year: Starting to significantly ramp up output.
The result could be an rise of around 500,000 barrels per day maybe by 2029.
Interest vs. Willingness for Investment
Experts make a critical difference between multinationals’ interest and their willingness to spend substantially.
“In my view their curiosity is an eight, on a range of ten. I think their appetite is a four or five, because there is a lack of certainty yet.”
Veteran operators in the country reinforce this sentiment. The thinking is that firms will publicly express enthusiasm while in practice acting with extreme caution.
The Enormous Investment Required
The financial outlay would be enormous. Research estimates suggest that adding between 500,000 and a million barrels per day would require in excess of $10 billion in investment over two to three years.
But, returning production to previous levels of around 2.5 million barrels per day could require a staggering $80 billion to $90 billion over six or seven years.
The Pending Question of Federal Guarantees
The idea of firms being reimbursed by the US taxpayer has been often mentioned. Nevertheless, specific plans on this proposal have so far not been announced.
This lack of certainty is the main impediment behind the sector's hesitation. Operators seek protection against political risk and the risk that a different president could refuse any promise.
“You need to be shielded from nationalization, that we’ve experienced in Venezuela previously.”
Ultimately, while rhetorical promises runs high, the practical risks suggest a path of extreme caution for potential significant investment in the Venezuelan energy industry.
