Industry experts have shown deep skepticism regarding bullish claims that American large firms will swiftly invest vast sums of dollars to revive Venezuela's crumbling energy sector.
The Need for Absolute Assurances
Without an “iron-clad guarantee” of financial backing from the US federal government, specialists predict international firms to move with great care.
“It seems premature to speculate on any upcoming plans,” an official said in response.
The optimistic schedule of under a year and a half has been boldly suggested. Nevertheless, industry projections indicate a more cautious outlook.
A More Realistic Timeline
“It is likely going to take 36 months for any significant recovery in production,” said an energy analyst.
Experts believe energy firms would likely spend:
- The first year: Sorting through new operating agreements.
- Following phase: Commencing rebuilding of facilities.
- The third year: Being able to meaningfully increase production.
This suggests an increase of around half a million barrels per day possibly by the end of the decade.
Appetite Compared to Appetite for Risk
Experts make a important separation between firms' attention and their readiness to commit significantly.
“I think their attention is an eight, on a range of one to 10. But their readiness is a mid-range score, because there is significant uncertainty yet.”
Experienced diplomats in the sector share this view. They believe that companies will publicly express enthusiasm while in practice acting with deliberate slowness.
The Enormous Cost
The financial bill would be colossal. University projections suggest that adding between half a million and a million bpd would require more than $10 billion in capital spending over two to three years.
However, restoring production to previous levels of around 2.5 million bpd could require a monumental $80 billion to $90 billion over six or seven years.
The Outstanding Issue of Government Backing
The prospect of energy companies being reimbursed by the US taxpayer has been repeatedly floated. But, formal assurances on any guarantee have not yet been forthcoming.
Without certainty is the main impediment behind the sector's reluctance. Firms seek safeguards against sovereign risk and the possibility that a different government could refuse any agreement.
“You need to be shielded from political change, that we’ve experienced in Venezuela previously.”
In summary, while rhetorical promises runs high, the financial realities suggest a road of extreme caution for any major investment in the Venezuelan energy industry.
