Industry experts have expressed deep doubt regarding optimistic claims that US oil giants will swiftly pump tens of billions of dollars to rebuild Venezuela's crumbling oil infrastructure.
Demand for Absolute Protections
Without an solid promise of complete repayment from the Washington, specialists predict multinational oil companies to proceed with significant hesitation.
“It seems premature to comment on any future business activities,” a representative commented this weekend.
The ambitious timeline of less than 18 months was publicly outlined. Yet, industry projections suggest a longer timeline.
A More Realistic Outlook
“It is likely going to take three years for any kind of recovery in production,” said one industry expert.
He suggested energy firms would likely spend:
- Initial phase: Securing new government and security contracts.
- Following phase: Commencing reconstruction of facilities.
- The third year: Reaching a position to significantly ramp up yield.
This suggests an increase of around half a million barrels per day perhaps by the end of the decade.
Desire Versus Readiness for Spending
Analysts draw a important separation between firms' attention and their readiness to commit substantially.
“I think their attention is an eight, on a scale of one to 10. However, their appetite is a mid-range score, because there is a lack of certainty yet.”
Experienced diplomats in the country echo this sentiment. The expectation is that majors will publicly express enthusiasm while in practice acting with extreme caution.
The Enormous Price Tag
The monetary outlay would be enormous. Independent analysis suggest that adding between 500,000 and a million bpd would require over $10 billion in investment over two to three years.
However, restoring production to peak levels of around 2.5 million barrels per day could require a staggering $80 billion to $90 billion over many more years.
The Pending Issue of Government Backing
The prospect of oil giants being compensated by the government has been repeatedly mentioned. However, specific plans on any guarantee have not yet been forthcoming.
This lack of certainty is the main impediment behind the industry's reluctance. Companies seek protection against nationalization and the risk that a different president could cancel any promise.
“You need to be protected from nationalization, that we’ve experienced in Venezuela previously.”
Therefore, while political confidence runs high, the practical challenges suggest a road of measured steps for potential significant investment in the country's energy industry.
