Industry experts have voiced considerable caution regarding optimistic claims that US large firms will quickly invest tens of billions of dollars to rebuild Venezuela's broken production facilities.
The Need for Solid Protections
Absent an absolute assurance of full reimbursement from the Washington, specialists predict global energy giants to move with significant hesitation.
“It seems premature to speculate on any potential investments,” an official stated recently.
The ambitious timeline of under a year and a half was publicly proposed. Yet, industry projections indicate a different picture.
A Likely Timeline
“Chances are going to take three years for any significant recovery in production,” noted one industry expert.
Experts believe oil companies would likely spend:
- Year one: Navigating new government and security contracts.
- Year two: Beginning rebuilding of facilities.
- The third year: Being able to meaningfully increase yield.
The result could be an rise of around half a million barrels per day possibly by 2029.
Interest vs. Willingness for Risk
Experts make a key distinction between companies' curiosity and their willingness to spend significantly.
“In my view their interest is an eight, on a scale of ten. However, their willingness is a much lower, because there is significant uncertainty yet.”
Seasoned operators in the region reinforce this view. They believe that companies will publicly talk up the opportunity while privately proceeding with extreme caution.
The Enormous Price Tag
The required investment would be enormous. Research analysis suggest that adding between half a million and a million barrels per day would require in excess of $10 billion in capital spending over two to three years.
However, returning production to previous levels of around 2.5 million bpd could require a massive $80 billion to $90 billion over six or seven years.
The Outstanding Issue of Federal Guarantees
The idea of oil giants being paid back by the US taxpayer has been repeatedly raised. But, concrete details on this proposal have not yet been provided.
The absence of clarity is the main reason behind the industry's hesitation. Operators seek protection against sovereign risk and the possibility that a different president could renege on any promise.
“You need to be protected from political change, that we’ve seen in Venezuela previously.”
In summary, while political confidence runs high, the operational risks suggest a road of extreme caution for potential significant investment in the Venezuelan oil sector.
