Market specialists have voiced considerable doubt regarding optimistic claims that US energy majors will rapidly invest billions of dollars to rebuild Venezuela's crumbling production facilities.
The Need for Solid Guarantees
Without an absolute assurance of full reimbursement from the Washington, analysts expect international firms to move with extreme caution.
“It would be hasty to speculate on any future business activities,” an official commented in response.
The ambitious schedule of under a year and a half has been boldly outlined. However, realistic assessments paint a different picture.
A Probable Schedule
“Chances are going to take multiple years for any significant output increase,” said an energy analyst.
The analysis indicates oil companies would likely spend:
- The first year: Securing new operating agreements.
- Following phase: Investing in rebuilding of facilities.
- The third year: Reaching a position to meaningfully increase production.
This suggests an rise of around half a million barrels per day perhaps by 2029.
Appetite Compared to Willingness for Investment
Analysts draw a critical difference between companies' curiosity and their appetite to invest substantially.
“I believe their attention is an eight, on a scale of one to 10. I think their willingness is a four or five, because there is a lack of certainty yet.”
Veteran diplomats in the sector reinforce this sentiment. The expectation is that majors will politically express enthusiasm while actually moving with extreme caution.
The Vast Investment Required
The required investment would be colossal. Independent estimates suggest that adding between half a million and a million bpd would require more than $10 billion in investment over two to three years.
Yet, returning output to previous levels of around 2.5 million barrels per day could require a massive $80 billion to $90 billion over six or seven years.
The Unanswered Question of Government Backing
The idea of energy companies being paid back by the government has been often mentioned. Nevertheless, concrete details on such a mechanism have so far not been forthcoming.
Without a solid plan is the primary impediment behind the sector's reluctance. Operators seek safeguards against nationalization and the chance that a future president could refuse any agreement.
“It is essential to be insured against political change, that we’ve experienced in Venezuela before.”
Therefore, while political confidence runs high, the practical risks suggest a road of slow deliberation for potential large-scale venture in the Venezuelan oil sector.
