Energy analysts have voiced deep doubt regarding bullish statements that American oil giants will rapidly pump billions of dollars to rebuild Venezuela's crumbling oil infrastructure.
Demand for Solid Guarantees
Absent an absolute assurance of financial backing from the US federal government, experts believe international firms to move with extreme caution.
“It is premature to comment on any future business activities,” an official said in response.
The ambitious schedule of less than a year and a half has been boldly proposed. Yet, expert analyses suggest a longer timeline.
A Likely Timeline
“It is likely going to take 36 months for any kind of production bounce,” said one energy analyst.
He suggested oil companies would likely spend:
- Year one: Sorting through new regulatory frameworks.
- The second year: Investing in overhaul of infrastructure.
- The third year: Being able to boost output.
This suggests an increase of around half a million bpd possibly by the end of the decade.
Desire Versus Willingness for Investment
There is a important separation between firms' attention and their willingness to spend significantly.
“In my view their attention is an eight, on a range of one to 10. However, their readiness is a much lower, because there is a lack of certainty yet.”
Experienced diplomats in the country echo this view. They believe that majors will politically talk up the opportunity while in practice proceeding with deliberate slowness.
The Enormous Cost
The financial outlay would be vast. University estimates suggest that adding between half a million and a million barrels per day would require over $10 billion in investment over several years.
Yet, restoring output to peak levels of around 2.5 million barrels per day could require a staggering $80 billion to $90 billion over six or seven years.
The Pending Issue of Government Backing
The prospect of energy companies being compensated by the US taxpayer has been repeatedly raised. Nevertheless, concrete details on such a mechanism have so far not been announced.
Without a solid plan is the key reason for the industry's reluctance. Firms seek safeguards against political risk and the chance that a different administration could cancel any promise.
“They must be protected from nationalization, that we’ve seen in Venezuela already.”
Therefore, while political promises runs strong, the financial realities suggest a journey of slow deliberation for any significant financial commitment in the Venezuelan oil sector.
