Industry experts have expressed considerable doubt regarding bullish statements that US energy majors will quickly invest vast sums of dollars to fix Venezuela's crumbling production facilities.
Demand for Iron-Clad Guarantees
Absent an “iron-clad guarantee” of complete repayment from the American government, analysts expect international firms to move with significant hesitation.
“It is premature to discuss any potential investments,” a spokesperson commented this weekend.
The optimistic schedule of under a year and a half was publicly proposed. However, realistic assessments paint a longer timeline.
A Probable Timeline
“It’s probably going to take multiple years for any kind of recovery in production,” said one industry expert.
He suggested oil companies would likely spend:
- Year one: Sorting through new regulatory frameworks.
- Year two: Commencing rebuilding of equipment.
- Final phase: Starting to meaningfully increase production.
This suggests an increase of around 500,000 barrels per day maybe by 2029.
Appetite Compared to Willingness for Investment
Analysts draw a critical difference between companies' curiosity and their willingness to spend significantly.
“In my view their interest is an eight, on a range of one to 10. But their willingness is a much lower, because there is no clarity yet.”
Experienced observers in the region reinforce this view. The thinking is that companies will politically talk up the opportunity while privately acting with extreme caution.
The Colossal Investment Required
The monetary outlay would be vast. University estimates suggest that adding between half a million and a million bpd would require in excess of $10 billion in investment over several years.
But, 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 Question of Taxpayer Funding
The prospect of energy companies being reimbursed by the US taxpayer has been often raised. Nevertheless, formal assurances on any guarantee have so far not been announced.
Without certainty is the key factor for the industry's hesitation. Operators seek guarantees against nationalization and the possibility that a different president could refuse any promise.
“It is essential to be insured against nationalization, that we’ve experienced in Venezuela before.”
In summary, while political promises runs strong, the operational challenges suggest a journey of slow deliberation for potential major investment in the country's energy industry.
