Energy analysts have shown deep caution regarding recent statements that American oil giants will quickly commit tens of billions of dollars to revive the country's broken oil infrastructure.
Requirement of Absolute Guarantees
Absent an “iron-clad guarantee” of full reimbursement from the US federal government, analysts expect international firms to move with extreme caution.
“It seems hasty to discuss any potential investments,” a representative said this weekend.
The aggressive schedule of under 18 months has been boldly proposed. Yet, expert analyses indicate a different picture.
A Likely Schedule
“It’s probably going to take 36 months for any kind of recovery in production,” commented one industry expert.
The analysis indicates energy firms would likely spend:
- Year one: Sorting through new operating agreements.
- The second year: Investing in overhaul of facilities.
- Final phase: Reaching a position to boost production.
The result could be an increase of around 500,000 barrels per day perhaps by the end of the decade.
Interest vs. Willingness for Investment
Analysts draw a key distinction between companies' curiosity and their appetite to invest substantially.
“I think their interest is an high score, on a range of one to 10. But their readiness is a much lower, because there is no clarity yet.”
Experienced observers in the region echo this caution. They believe that majors will politically express enthusiasm while in practice proceeding with extreme caution.
The Enormous Cost
The monetary bill would be enormous. University analysis suggest that adding between half a million and a million barrels per day would require more than $10 billion in investment over two to three years.
Yet, returning output to previous levels of around 2.5 million bpd could require a monumental $80 billion to $90 billion over six or seven years.
The Unanswered Question of Taxpayer Funding
The idea of energy companies being compensated by the US taxpayer has been often raised. Nevertheless, formal assurances on such a mechanism have so far not been announced.
Without clarity is the primary factor for the sector's hesitation. Companies seek guarantees against political risk and the risk that a subsequent administration could cancel any deal.
“You need to be insured against sovereign risk, that we’ve seen in Venezuela previously.”
Ultimately, while rhetorical promises runs high, the practical risks suggest a journey of extreme caution for potential significant investment in the Venezuelan energy industry.
