Market specialists have shown deep doubt regarding bullish claims that US oil giants will rapidly pump tens of billions of dollars to revive Venezuela's crumbling energy sector.
Requirement of Absolute Guarantees
Lacking an absolute assurance of full reimbursement from the Washington, specialists predict global energy giants to move with extreme caution.
“It would be hasty to speculate on any upcoming plans,” a spokesperson commented in response.
The ambitious timeframe of less than 18 months has been publicly outlined. Yet, expert analyses indicate a more cautious outlook.
A More Realistic Schedule
“Chances are going to take multiple years for any significant recovery in production,” commented one chief investment officer.
He suggested energy firms would likely spend:
- The first year: Sorting through new government and security contracts.
- Year two: Investing in rebuilding of facilities.
- Year three: Starting to boost output.
The result could be an increase of around half a million barrels per day possibly by the end of the decade.
Appetite Compared to Willingness for Spending
Analysts draw a important separation between firms' attention and their willingness to spend significantly.
“I think their attention is an eight, on a range of ten. However, their appetite is a mid-range score, because there is significant uncertainty yet.”
Experienced observers in the region share this view. The thinking is that companies will publicly call it fantastic while in practice proceeding with great care.
The Vast Investment Required
The monetary outlay would be colossal. University analysis suggest that increasing production by between 500,000 and a million barrels per day would require over $10 billion in investment over several years.
But, rebuilding output to previous levels of around 2.5 million barrels per day could require a monumental $80 billion to $90 billion over many more years.
The Outstanding Issue of Taxpayer Funding
The prospect of oil giants being paid back by the US taxpayer has been repeatedly floated. However, specific plans on such a mechanism have not yet been forthcoming.
This lack of clarity is the primary factor for the sector's reluctance. Operators seek guarantees against sovereign risk and the possibility that a different government could refuse any deal.
“They must be protected from nationalization, that we’ve seen in Venezuela before.”
Therefore, while political optimism runs high, the financial realities suggest a road of slow deliberation for potential major venture in the Venezuelan energy industry.
