Industry experts have shown significant doubt regarding recent statements that American oil giants will quickly commit vast sums of dollars to rebuild the country's broken production facilities.
Requirement of Absolute Assurances
Absent an absolute assurance of full reimbursement from the American government, analysts expect multinational oil companies to act with great care.
“It seems premature to speculate on any future business activities,” an official commented recently.
The aggressive timeframe of less than a year and a half has been publicly outlined. Yet, expert analyses paint a longer timeline.
A Likely Timeline
“It’s probably going to take 36 months for any meaningful recovery in production,” commented an chief investment officer.
The analysis indicates operators would likely spend:
- The first year: Securing new operating agreements.
- Year two: Commencing rebuilding of facilities.
- Final phase: Being able to meaningfully increase output.
The result could be an increase of around half a million barrels per day maybe by the end of the decade.
Desire Versus Appetite for Spending
Experts make a key distinction between firms' attention and their appetite to invest substantially.
“I believe their attention is an high score, on a range of one to 10. However, their willingness is a mid-range score, because there is a lack of certainty yet.”
Experienced observers in the sector share this caution. The thinking is that majors will politically express enthusiasm while actually proceeding with extreme caution.
The Vast Cost
The financial outlay would be enormous. University analysis suggest that adding between 500,000 and a million barrels per day would require in excess of $10 billion in investment over several years.
Yet, rebuilding production to peak levels of around 2.5 million bpd could require a massive $80 billion to $90 billion over six or seven years.
The Unanswered Question of Taxpayer Funding
The prospect of firms being reimbursed by the federal government has been repeatedly floated. Nevertheless, formal assurances on such a mechanism have so far not been provided.
This lack of clarity is the main factor behind the industry's hesitation. Firms seek guarantees against political risk and the chance that a different administration could cancel any deal.
“You need to be protected from nationalization, that we’ve seen in Venezuela before.”
Therefore, while political promises runs strong, the operational realities suggest a road of slow deliberation for any significant financial commitment in the Venezuelan energy industry.
