Market specialists have expressed deep skepticism regarding bullish statements that American oil giants will swiftly invest vast sums of dollars to fix Venezuela's crumbling production facilities.
Requirement of Absolute Protections
Lacking an solid promise of full reimbursement from the US federal government, specialists predict international firms to act with extreme caution.
“It seems hasty to discuss any future business activities,” an official stated this weekend.
The ambitious schedule of less than 18 months was boldly outlined. Yet, realistic assessments paint a more cautious outlook.
A More Realistic Schedule
“Chances are going to take 36 months for any significant recovery in production,” commented one chief investment officer.
He suggested energy firms would likely spend:
- The first year: Sorting through new regulatory frameworks.
- Year two: Investing in overhaul of facilities.
- The third year: Starting to meaningfully increase production.
This would lead to an increase of around half a million bpd perhaps by 2029.
Interest vs. Willingness for Investment
There is a critical difference between companies' curiosity and their willingness to spend heavily.
“In my view their interest is an high score, on a range of one to 10. I think their readiness is a much lower, because there is no clarity yet.”
Seasoned diplomats in the sector share this view. The thinking is that companies will politically express enthusiasm while actually moving with great care.
The Colossal Price Tag
The required bill would be enormous. Research estimates suggest that adding between 500,000 and a million barrels per day would require over $10 billion in investment over several years.
Yet, 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 Pending Question of Taxpayer Funding
The suggestion of firms being paid back by the US taxpayer has been often mentioned. Nevertheless, formal assurances on such a mechanism have so far not been announced.
Without clarity is the main impediment for the sector's hesitation. Operators seek safeguards against sovereign risk and the chance that a subsequent government could renege on any deal.
“It is essential to be shielded from political change, that we’ve experienced in Venezuela already.”
Ultimately, while rhetorical promises runs strong, the operational risks suggest a path of extreme caution for any major venture in the country's oil sector.
