Industry experts have voiced considerable caution regarding optimistic predictions that American large firms will quickly pump tens of billions of dollars to fix Venezuela's broken production facilities.
Requirement of Solid Protections
Lacking an “iron-clad guarantee” of full reimbursement from the US federal government, experts believe global energy giants to act with significant hesitation.
“It seems too early to speculate on any upcoming plans,” a spokesperson said in response.
The ambitious schedule of less than a year and a half was boldly suggested. Yet, realistic assessments paint a different picture.
A Likely Schedule
“Chances are going to take multiple years for any significant recovery in production,” said one industry expert.
He suggested oil companies would likely spend:
- The first year: Securing new operating agreements.
- The second year: Commencing reconstruction of equipment.
- Final phase: Starting to meaningfully increase production.
This would lead to an boost of around 500,000 bpd possibly by the end of the decade.
Desire Versus Readiness for Spending
There is a key distinction between firms' attention and their willingness to spend significantly.
“In my view their curiosity is an eight, on a scale of one to 10. However, their readiness is a mid-range score, because there is no clarity yet.”
Experienced observers in the region share this sentiment. The thinking is that companies will publicly talk up the opportunity while in practice acting with deliberate slowness.
The Vast Price Tag
The monetary investment would be colossal. Independent estimates suggest that adding between 500,000 and a million bpd would require in excess of $10 billion in capital spending over two to three years.
However, restoring production to historical levels of around 2.5 million bpd could require a monumental $80 billion to $90 billion over six or seven years.
The Unanswered Issue of Government Backing
The suggestion of energy companies being reimbursed by the government has been repeatedly mentioned. However, formal assurances on such a mechanism have so far not been provided.
The absence of a solid plan is the main factor for the sector's hesitation. Firms seek safeguards against sovereign risk and the chance that a different president could refuse any agreement.
“It is essential to be protected from nationalization, that we’ve experienced in Venezuela before.”
Therefore, while rhetorical promises runs strong, the financial challenges suggest a path of measured steps for any major investment in the country's energy industry.
