Energy analysts have expressed considerable doubt regarding bullish statements that American energy majors will quickly commit billions of dollars to rebuild Venezuela's dilapidated production facilities.
The Need for Solid Guarantees
Absent an absolute assurance of financial backing from the American government, analysts expect global energy giants to act with extreme caution.
“It seems premature to discuss any upcoming plans,” a spokesperson said in response.
The ambitious schedule of under 18 months was boldly outlined. Nevertheless, industry projections paint a different picture.
A More Realistic Outlook
“It’s probably going to take 36 months for any significant production bounce,” said one industry expert.
Experts believe operators would likely spend:
- The first year: Securing new regulatory frameworks.
- The second year: Commencing rebuilding of facilities.
- The third year: Reaching a position to meaningfully increase yield.
This would lead to an rise of around 500,000 barrels per day possibly by the end of the decade.
Interest vs. Readiness for Spending
There is a critical difference between firms' attention and their appetite to invest significantly.
“I think their interest is an eight, on a range of ten. But their readiness is a much lower, because there is no clarity yet.”
Veteran observers in the country reinforce this sentiment. The thinking is that companies will publicly express enthusiasm while in practice acting with deliberate slowness.
The Enormous Price Tag
The monetary outlay would be enormous. Independent analysis suggest that increasing production by between half a million and a million bpd would require in excess of $10 billion in investment over two to three years.
Yet, rebuilding output to peak 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 Federal Guarantees
The prospect of firms being paid back by the federal government has been repeatedly mentioned. However, specific plans on such a mechanism have not yet been provided.
This lack of certainty is the primary factor behind the sector's hesitation. Operators seek protection against political risk and the possibility that a different government could refuse any deal.
“They must be shielded from nationalization, that we’ve experienced in Venezuela already.”
Therefore, while political promises runs strong, the operational realities suggest a road of extreme caution for potential large-scale venture in the country's energy industry.
