Industry experts have voiced deep skepticism regarding recent statements that American energy majors will quickly pump vast sums of dollars to fix the country's broken energy sector.
The Need for Solid Guarantees
Lacking an “iron-clad guarantee” of complete repayment from the Washington, experts believe multinational oil companies to move with great care.
“It is hasty to comment on any upcoming plans,” a representative said this weekend.
The aggressive schedule of less than 18 months was publicly outlined. However, realistic assessments suggest a longer timeline.
A More Realistic Schedule
“It is likely going to take three years for any kind of output increase,” said one industry expert.
The analysis indicates operators would likely spend:
- Year one: Navigating new regulatory frameworks.
- Year two: Commencing rebuilding of equipment.
- Year three: Reaching a position to meaningfully increase output.
The result could be an increase of around half a million bpd possibly by the end of the decade.
Appetite Compared to Readiness for Risk
Experts make a critical difference between firms' attention and their appetite to invest significantly.
“In my view their interest is an eight, on a range of ten. But their willingness is a much lower, because there is no clarity yet.”
Seasoned diplomats in the country reinforce this caution. The thinking is that companies will politically call it fantastic while actually proceeding with extreme caution.
The Vast Price Tag
The financial bill would be colossal. Research analysis suggest that adding between 500,000 and a million bpd would require more than $10 billion in funding over two to three years.
Yet, restoring output to peak levels of around 2.5 million barrels per day could require a monumental $80 billion to $90 billion over six or seven years.
The Pending Issue of Government Backing
The idea of oil giants being compensated by the US taxpayer has been often mentioned. Nevertheless, specific plans on any guarantee have so far not been announced.
This lack of certainty is the primary reason for the industry's caution. Operators seek protection against sovereign risk and the possibility that a future government could cancel any deal.
“You need to be shielded from political change, that we’ve witnessed in Venezuela already.”
Therefore, while political confidence runs high, the operational realities suggest a road of slow deliberation for any large-scale financial commitment in the Venezuelan oil sector.
