Industry experts have expressed deep caution regarding bullish predictions that US energy majors will rapidly pump billions of dollars to rebuild Venezuela's crumbling energy sector.
Demand for Absolute Guarantees
Absent an absolute assurance of full reimbursement from the American government, analysts expect multinational oil companies to proceed with extreme caution.
“It is too early to comment on any upcoming plans,” a representative commented in response.
The ambitious timeline of under 18 months was boldly proposed. However, realistic assessments indicate a longer timeline.
A Probable Schedule
“It is likely going to take multiple years for any meaningful recovery in production,” commented an industry expert.
He suggested operators would likely spend:
- The first year: Sorting through new operating agreements.
- The second year: Investing in rebuilding of equipment.
- Year three: Starting to meaningfully increase yield.
The result could be an increase of around 500,000 barrels per day possibly by the end of the decade.
Desire Versus Appetite for Investment
There is a critical difference between multinationals’ interest and their appetite to invest heavily.
“I believe their interest is an eight, on a range of one to 10. But their willingness is a four or five, because there is a lack of certainty yet.”
Seasoned operators in the sector echo this sentiment. The thinking is that firms will publicly call it fantastic while actually acting with deliberate slowness.
The Enormous Price Tag
The monetary investment would be vast. University estimates suggest that adding between 500,000 and a million bpd would require in excess of $10 billion in investment over two to three years.
Yet, rebuilding production to historical levels of around 2.5 million bpd could require a staggering $80 billion to $90 billion over many more years.
The Pending Question of Federal Guarantees
The prospect of energy companies being reimbursed by the US taxpayer has been often floated. However, specific plans on such a mechanism have not yet been forthcoming.
Without a solid plan is the main impediment for the industry's reluctance. Companies seek protection against nationalization and the chance that a different administration could refuse any promise.
“It is essential to be shielded from sovereign risk, that we’ve seen in Venezuela before.”
Therefore, while rhetorical promises runs high, the operational realities suggest a path of measured steps for potential large-scale investment in the country's energy industry.
