Energy analysts have expressed deep caution regarding bullish claims that US large firms will quickly commit tens of billions of dollars to fix Venezuela's broken production facilities.
Demand for Absolute Guarantees
Lacking an absolute assurance of full reimbursement from the Washington, analysts expect multinational oil companies to act with significant hesitation.
“It would be too early to speculate on any upcoming plans,” a spokesperson stated recently.
The optimistic timeframe of under 18 months has been boldly outlined. Nevertheless, industry projections suggest a more cautious outlook.
A Probable Outlook
“It’s probably going to take three years for any meaningful output increase,” commented an chief investment officer.
Experts believe oil companies would likely spend:
- Year one: Sorting through new government and security contracts.
- The second year: Commencing rebuilding of equipment.
- Year three: Being able to significantly ramp up output.
This would lead to an increase of around 500,000 barrels per day possibly by the end of the decade.
Interest vs. Readiness for Spending
Experts make a key distinction between companies' curiosity and their readiness to commit substantially.
“I believe their curiosity is an eight, on a range of ten. I think their willingness is a much lower, because there is a lack of certainty yet.”
Experienced operators in the sector echo this view. The thinking is that companies will publicly call it fantastic while in practice acting with great care.
The Enormous Price Tag
The monetary investment would be colossal. Independent analysis suggest that adding between half a million and a million barrels per day would require in excess of $10 billion in capital spending over several years.
However, returning output to previous 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 Question of Federal Guarantees
The prospect of energy companies being compensated by the US taxpayer has been often floated. However, concrete details on any guarantee have not yet been provided.
Without clarity is the primary factor behind the industry's caution. Operators seek safeguards against sovereign risk and the risk that a different president could renege on any deal.
“It is essential to be protected from sovereign risk, that we’ve witnessed in Venezuela already.”
In summary, while political promises runs high, the operational challenges suggest a path of slow deliberation for any large-scale investment in the country's energy industry.
