Industry experts have expressed deep doubt regarding recent predictions that American large firms will swiftly invest vast sums of dollars to rebuild Venezuela's crumbling production facilities.
Demand for Absolute Protections
Absent an “iron-clad guarantee” of complete repayment from the Washington, specialists predict international firms to move with extreme caution.
“It would be premature to speculate on any potential investments,” an official said this weekend.
The optimistic timeline of under a year and a half was boldly proposed. Nevertheless, industry projections suggest a different picture.
A Probable Schedule
“Chances are going to take three years for any kind of output increase,” noted one chief investment officer.
He suggested energy firms would likely spend:
- The first year: Sorting through new government and security contracts.
- The second year: Beginning overhaul of equipment.
- Final phase: Being able to meaningfully increase output.
The result could be an boost of around half a million bpd maybe by 2029.
Desire Versus Readiness for Investment
Experts make a critical difference between firms' attention and their appetite to invest heavily.
“In my view their curiosity is an eight, on a range of one to 10. I think their appetite is a four or five, because there is no clarity yet.”
Experienced diplomats in the country share this caution. The expectation is that companies will publicly talk up the opportunity while in practice moving with great care.
The Enormous Cost
The financial investment would be vast. Research analysis suggest that increasing production by between 500,000 and a million bpd would require more than $10 billion in funding over two to three years.
But, rebuilding output to previous levels of around 2.5 million barrels per day could require a massive $80 billion to $90 billion over many more years.
The Pending Question of Government Backing
The suggestion of energy companies being reimbursed by the US taxpayer has been repeatedly floated. Nevertheless, specific plans on this proposal have so far not been forthcoming.
The absence of clarity is the key impediment behind the sector's hesitation. Companies seek guarantees against nationalization and the risk that a future government could cancel any agreement.
“It is essential to be protected from political change, that we’ve seen in Venezuela previously.”
Therefore, while political promises runs high, the financial challenges suggest a path of measured steps for potential significant venture in the country's oil sector.
