Energy analysts have expressed deep caution regarding bullish claims that American large firms will quickly pump vast sums of dollars to revive Venezuela's dilapidated oil infrastructure.
Requirement of Absolute Assurances
Absent an solid promise of financial backing from the Washington, specialists predict international firms to act with extreme caution.
“It would be too early to speculate on any future business activities,” a representative stated recently.
The ambitious schedule of under 18 months has been boldly outlined. Yet, expert analyses suggest a more cautious outlook.
A Probable Timeline
“It is likely going to take three years for any kind of output increase,” said an industry expert.
He suggested operators would likely spend:
- Year one: Securing new government and security contracts.
- Following phase: Beginning reconstruction of equipment.
- Final phase: Starting to boost production.
This would lead to an increase of around 500,000 bpd possibly by 2029.
Desire Versus Appetite for Investment
Analysts draw a important separation between firms' attention and their appetite to invest significantly.
“In my view their curiosity is an eight, on a scale of ten. But their appetite is a mid-range score, because there is no clarity yet.”
Veteran diplomats in the region share this view. The thinking is that companies will publicly express enthusiasm while actually proceeding with extreme caution.
The Vast Cost
The monetary investment would be enormous. Independent analysis suggest that adding between 500,000 and a million barrels per day would require over $10 billion in funding over several years.
Yet, returning production to previous levels of around 2.5 million barrels per day could require a staggering $80 billion to $90 billion over many more years.
The Outstanding Issue of Government Backing
The idea of firms being paid back by the US taxpayer has been repeatedly raised. But, concrete details on such a mechanism have so far not been announced.
This lack of a solid plan is the main reason behind the sector's caution. Companies seek safeguards against sovereign risk and the chance that a subsequent government could renege on any deal.
“You need to be protected from nationalization, that we’ve experienced in Venezuela before.”
Therefore, while political promises runs strong, the financial realities suggest a road of measured steps for potential large-scale financial commitment in the Venezuelan oil sector.
