Market specialists have voiced deep doubt regarding optimistic predictions that US energy majors will rapidly pump tens of billions of dollars to revive the country's dilapidated energy sector.
Requirement of Iron-Clad Guarantees
Without an solid promise of complete repayment from the Washington, analysts expect international firms to act with great care.
“It seems too early to speculate on any potential investments,” a representative stated this weekend.
The optimistic schedule of less than 18 months was publicly outlined. Yet, expert analyses indicate a different picture.
A More Realistic Schedule
“It’s probably going to take 36 months for any kind of recovery in production,” noted one industry expert.
Experts believe energy firms would likely spend:
- Year one: Sorting through new operating agreements.
- The second year: Commencing rebuilding of facilities.
- The third year: Reaching a position to boost production.
The result could be an boost of around half a million barrels per day possibly by the end of the decade.
Interest vs. Readiness for Risk
Experts make a critical difference between firms' attention and their readiness to commit substantially.
“I believe their attention is an high score, on a range of one to 10. But their willingness is a four or five, because there is significant uncertainty yet.”
Experienced observers in the sector share this view. They believe that firms will publicly call it fantastic while privately proceeding with great care.
The Vast Cost
The financial investment would be enormous. Independent projections suggest that increasing production by between 500,000 and a million barrels per day would require more than $10 billion in funding over several years.
However, rebuilding production to previous levels of around 2.5 million bpd could require a staggering $80 billion to $90 billion over six or seven years.
The Unanswered Question of Government Backing
The idea of energy companies being reimbursed by the government has been often raised. Nevertheless, formal assurances on such a mechanism have not yet been forthcoming.
Without a solid plan is the main reason for the sector's hesitation. Operators seek guarantees against nationalization and the chance that a subsequent government could renege on any deal.
“They must be protected from nationalization, that we’ve experienced in Venezuela already.”
In summary, while political confidence runs strong, the financial challenges suggest a journey of extreme caution for any major financial commitment in the Venezuelan oil sector.
