Energy analysts have voiced deep skepticism regarding bullish statements that US large firms will quickly commit billions of dollars to revive Venezuela's broken energy sector.
Requirement of Iron-Clad Guarantees
Absent an solid promise of complete repayment from the Washington, experts believe global energy giants to proceed with great care.
“It is hasty to comment on any potential investments,” an official commented in response.
The ambitious timeframe of less than a year and a half has been publicly proposed. However, expert analyses paint a different picture.
A Probable Timeline
“It is likely going to take 36 months for any significant production bounce,” commented an energy analyst.
He suggested energy firms would likely spend:
- Initial phase: Navigating new operating agreements.
- Following phase: Beginning rebuilding of equipment.
- The third year: Reaching a position to boost yield.
This would lead to an increase of around half a million bpd possibly by the end of the decade.
Interest vs. Readiness for Investment
There is a critical difference between firms' attention and their readiness to commit significantly.
“In my view their interest is an eight, on a range of one to 10. I think their willingness is a mid-range score, because there is no clarity yet.”
Veteran observers in the sector reinforce this view. The thinking is that companies will publicly talk up the opportunity while privately proceeding with extreme caution.
The Colossal Price Tag
The financial bill would be enormous. Independent analysis suggest that increasing production by between 500,000 and a million bpd would require more than $10 billion in capital spending over several years.
But, returning output to historical levels of around 2.5 million barrels per day could require a massive $80 billion to $90 billion over many more years.
The Pending Question of Taxpayer Funding
The prospect of firms being paid back by the federal government has been repeatedly floated. But, specific plans on such a mechanism have not yet been provided.
The absence of certainty is the main reason behind the industry's caution. Operators seek protection against sovereign risk and the possibility that a subsequent government could cancel any promise.
“It is essential to be protected from political change, that we’ve seen in Venezuela previously.”
Therefore, while political optimism runs high, the operational challenges suggest a road of measured steps for potential major investment in the Venezuelan energy industry.
