Industry experts have expressed considerable doubt regarding optimistic statements that US oil giants will quickly commit billions of dollars to revive the country's crumbling production facilities.
Demand for Absolute Protections
Absent an solid promise of full reimbursement from the Washington, specialists predict global energy giants to proceed with extreme caution.
“It is premature to discuss any potential investments,” an official commented this weekend.
The optimistic schedule of under a year and a half has been boldly suggested. However, expert analyses suggest a different picture.
A More Realistic Schedule
“It is likely going to take multiple years for any significant recovery in production,” commented an industry expert.
He suggested operators would likely spend:
- Year one: Sorting through new operating agreements.
- Year two: Commencing overhaul of equipment.
- The third year: Starting to meaningfully increase yield.
This would lead to an rise of around half a million barrels per day perhaps by the end of the decade.
Interest vs. Appetite for Risk
There is a important separation between firms' attention and their readiness to commit heavily.
“In my view their curiosity is an eight, on a scale of one to 10. But their willingness is a four or five, because there is no clarity yet.”
Veteran operators in the country share this sentiment. The thinking is that firms will politically talk up the opportunity while privately moving with extreme caution.
The Colossal Price Tag
The required outlay would be enormous. Independent estimates suggest that adding between half a million and a million bpd would require more than $10 billion in capital spending over two to three years.
But, rebuilding 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 Question of Federal Guarantees
The suggestion of energy companies being paid back by the US taxpayer has been often mentioned. But, concrete details on this proposal have so far not been announced.
The absence of certainty is the primary factor behind the industry's reluctance. Operators seek guarantees against nationalization and the risk that a future government could cancel any promise.
“It is essential to be shielded from nationalization, that we’ve experienced in Venezuela already.”
Therefore, while rhetorical confidence runs high, the practical realities suggest a path of extreme caution for potential large-scale investment in the Venezuelan oil sector.
