Industry experts have shown significant skepticism regarding bullish predictions that US energy majors will swiftly commit vast sums of dollars to rebuild the country's dilapidated oil infrastructure.
Demand for Solid Assurances
Absent an “iron-clad guarantee” of complete repayment from the US federal government, specialists predict multinational oil companies to move with extreme caution.
“It is premature to discuss any potential investments,” a spokesperson commented this weekend.
The aggressive schedule of less than 18 months has been boldly suggested. Nevertheless, industry projections paint a more cautious outlook.
A Likely Schedule
“It’s probably going to take 36 months for any kind of recovery in production,” said an energy analyst.
He suggested oil companies would likely spend:
- The first year: Securing new government and security contracts.
- Year two: Investing in rebuilding of equipment.
- The third year: Being able to meaningfully increase production.
This suggests an increase of around 500,000 barrels per day perhaps by the end of the decade.
Interest vs. Willingness for Investment
Analysts draw a critical difference between multinationals’ interest and their appetite to invest substantially.
“In my view their curiosity is an high score, on a scale of one to 10. However, their appetite is a mid-range score, because there is a lack of certainty yet.”
Seasoned operators in the sector echo this view. The thinking is that companies will politically call it fantastic while in practice proceeding with great care.
The Vast Price Tag
The required bill would be vast. Independent projections suggest that increasing production by between half a million and a million bpd would require more than $10 billion in capital spending over several years.
However, returning output to historical 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 Federal Guarantees
The idea of energy companies being compensated by the US taxpayer has been repeatedly raised. However, concrete details on any guarantee have not yet been announced.
Without clarity is the main factor behind the sector's hesitation. Operators seek protection against political risk and the possibility that a future president could renege on any deal.
“They must be shielded from nationalization, that we’ve witnessed in Venezuela previously.”
Ultimately, while political confidence runs strong, the financial risks suggest a journey of measured steps for potential large-scale venture in the Venezuelan energy industry.
