Industry experts have voiced deep doubt regarding bullish statements that US large firms will swiftly invest billions of dollars to fix the country's broken production facilities.
The Need for Absolute Assurances
Without an solid promise of financial backing from the Washington, experts believe multinational oil companies to act with significant hesitation.
“It would be premature to comment on any potential investments,” a spokesperson stated in response.
The optimistic schedule of under a year and a half has been publicly outlined. Yet, expert analyses suggest a more cautious outlook.
A Probable Schedule
“Chances are going to take three years for any kind of recovery in production,” said one industry expert.
He suggested oil companies would likely spend:
- Year one: Sorting through new government and security contracts.
- The second year: Investing in rebuilding of facilities.
- Final phase: Starting to meaningfully increase output.
This would lead to an boost of around half a million bpd perhaps by the end of the decade.
Appetite Compared to Willingness for Risk
There is a key distinction between companies' curiosity and their readiness to commit heavily.
“I think their curiosity is an high score, on a scale of one to 10. However, their readiness is a mid-range score, because there is no clarity yet.”
Experienced diplomats in the sector reinforce this caution. They believe that firms will politically call it fantastic while actually acting with extreme caution.
The Enormous Price Tag
The monetary bill would be vast. Research estimates suggest that increasing production by between half a million and a million bpd would require in excess of $10 billion in funding over several years.
But, rebuilding output to peak levels of around 2.5 million barrels per day could require a massive $80 billion to $90 billion over many more years.
The Pending Question of Taxpayer Funding
The idea of oil giants being reimbursed by the US taxpayer has been repeatedly mentioned. However, concrete details on such a mechanism have not yet been provided.
This lack of certainty is the primary factor for the industry's reluctance. Firms seek guarantees against political risk and the possibility that a future government could cancel any promise.
“They must be insured against sovereign risk, that we’ve seen in Venezuela before.”
Ultimately, while political promises runs strong, the practical challenges suggest a path of slow deliberation for potential large-scale venture in the Venezuelan energy industry.
