Energy analysts have voiced deep skepticism regarding bullish predictions that US energy majors will rapidly invest vast sums of dollars to fix Venezuela's crumbling energy sector.
Demand for Absolute Protections
Absent an solid promise of complete repayment from the American government, experts believe multinational oil companies to move with extreme caution.
“It seems too early to discuss any upcoming plans,” a representative commented this weekend.
The ambitious timeframe of less than 18 months has been boldly suggested. Yet, industry projections indicate a more cautious outlook.
A Probable Schedule
“Chances are going to take multiple years for any meaningful output increase,” said one chief investment officer.
The analysis indicates energy firms would likely spend:
- Initial phase: Securing new government and security contracts.
- Following phase: Commencing reconstruction of equipment.
- The third year: Being able to meaningfully increase production.
This suggests an boost of around half a million barrels per day possibly by the end of the decade.
Desire Versus Readiness for Spending
Experts make a key distinction between firms' attention and their willingness to spend significantly.
“In my view their interest is an eight, on a scale of ten. However, their willingness is a much lower, because there is significant uncertainty yet.”
Veteran diplomats in the sector reinforce this sentiment. The thinking is that majors will politically express enthusiasm while in practice proceeding with great care.
The Vast Investment Required
The financial investment would be colossal. Research estimates suggest that adding between 500,000 and a million barrels per day would require more than $10 billion in investment over several years.
Yet, rebuilding production to previous levels of around 2.5 million bpd could require a staggering $80 billion to $90 billion over many more years.
The Outstanding Issue of Federal Guarantees
The suggestion of energy companies being reimbursed by the US taxpayer has been repeatedly floated. But, concrete details on any guarantee have so far not been announced.
This lack of certainty is the main factor behind the sector's reluctance. Firms seek protection against political risk and the possibility that a future president could renege on any agreement.
“You need to be insured against sovereign risk, that we’ve seen in Venezuela already.”
Ultimately, while rhetorical confidence runs strong, the practical realities suggest a journey of extreme caution for potential significant investment in the country's energy industry.
