Market specialists have shown deep skepticism regarding bullish statements that US energy majors will quickly pump vast sums of dollars to rebuild the country's dilapidated production facilities.
Demand for Solid Guarantees
Absent an solid promise of complete repayment from the American government, experts believe global energy giants to act with great care.
“It is too early to speculate on any future business activities,” a representative said recently.
The ambitious timeframe of under a year and a half was boldly suggested. Yet, expert analyses indicate a longer timeline.
A Likely Outlook
“It’s probably going to take 36 months for any significant recovery in production,” said an chief investment officer.
The analysis indicates oil companies would likely spend:
- Year one: Sorting through new operating agreements.
- Following phase: Beginning reconstruction of infrastructure.
- Year three: Starting to meaningfully increase output.
This would lead to an boost of around half a million bpd perhaps by the end of the decade.
Interest vs. Appetite for Risk
Experts make a critical difference between firms' attention and their willingness to spend significantly.
“I think their curiosity is an high score, on a scale of one to 10. But their willingness is a four or five, because there is significant uncertainty yet.”
Veteran observers in the region reinforce this caution. The thinking is that companies will politically talk up the opportunity while actually moving with extreme caution.
The Enormous Cost
The required outlay would be enormous. Research estimates suggest that increasing production by between half a million and a million barrels per day would require over $10 billion in funding over several years.
Yet, returning output to peak levels of around 2.5 million bpd could require a massive $80 billion to $90 billion over six or seven years.
The Unanswered Issue of Taxpayer Funding
The idea of firms being reimbursed by the US taxpayer has been often mentioned. But, formal assurances on such a mechanism have so far not been provided.
This lack of clarity is the key reason behind the sector's hesitation. Companies seek safeguards against political risk and the possibility that a future government could renege on any promise.
“They must be shielded from political change, that we’ve experienced in Venezuela before.”
Therefore, while rhetorical confidence runs high, the operational challenges suggest a path of slow deliberation for potential major investment in the Venezuelan energy industry.
