Energy analysts have voiced considerable doubt regarding optimistic predictions that US large firms will swiftly pump vast sums of dollars to fix Venezuela's dilapidated production facilities.
The Need for Solid Assurances
Without an solid promise of financial backing from the American government, analysts expect global energy giants to act with great care.
“It is premature to speculate on any future business activities,” an official commented recently.
The ambitious timeline of less than a year and a half has been boldly suggested. However, expert analyses paint a different picture.
A Likely Timeline
“Chances are going to take three years for any meaningful production bounce,” commented an industry expert.
He suggested energy firms would likely spend:
- Initial phase: Navigating new operating agreements.
- Following phase: Investing in overhaul of infrastructure.
- Final phase: Starting to significantly ramp up yield.
This would lead to an rise of around 500,000 bpd perhaps by the end of the decade.
Desire Versus Willingness for Risk
Analysts draw a important separation between multinationals’ interest and their appetite to invest significantly.
“I think their curiosity is an high score, on a range of one to 10. I think their appetite is a mid-range score, because there is no clarity yet.”
Experienced diplomats in the region echo this view. The thinking is that companies will publicly express enthusiasm while privately moving with great care.
The Enormous Price Tag
The required outlay would be enormous. Independent analysis suggest that adding between 500,000 and a million barrels per day would require over $10 billion in funding over several years.
But, rebuilding production to historical levels of around 2.5 million bpd could require a staggering $80 billion to $90 billion over six or seven years.
The Unanswered Issue of Taxpayer Funding
The prospect of energy companies being compensated by the federal government has been often mentioned. Nevertheless, concrete details on this proposal have not yet been forthcoming.
This lack of certainty is the main reason behind the sector's reluctance. Companies seek protection against sovereign risk and the risk that a different government could renege on any promise.
“They must be protected from sovereign risk, that we’ve experienced in Venezuela already.”
In summary, while rhetorical promises runs high, the financial realities suggest a journey of measured steps for potential significant financial commitment in the country's energy industry.
