Industry experts have voiced deep skepticism regarding optimistic statements that American large firms will quickly commit tens of billions of dollars to revive Venezuela's broken energy sector.
The Need for Solid Assurances
Lacking an solid promise of full reimbursement from the Washington, experts believe international firms to act with extreme caution.
“It would be too early to speculate on any future business activities,” a spokesperson said in response.
The optimistic schedule of under 18 months was publicly outlined. Nevertheless, realistic assessments suggest a different picture.
A Likely Schedule
“It’s probably going to take 36 months for any kind of production bounce,” noted an industry expert.
He suggested energy firms would likely spend:
- The first year: Securing new government and security contracts.
- The second year: Commencing overhaul of equipment.
- The third year: Starting to meaningfully increase output.
This suggests an increase of around 500,000 barrels per day possibly by the end of the decade.
Desire Versus Appetite for Spending
Experts make a critical difference between firms' attention and their willingness to spend substantially.
“In my view their curiosity is an high score, on a range of one to 10. But their appetite is a four or five, because there is no clarity yet.”
Experienced observers in the sector reinforce this view. The expectation is that majors will politically talk up the opportunity while in practice acting with extreme caution.
The Vast Price Tag
The required outlay would be enormous. Independent projections suggest that adding between 500,000 and a million barrels per day would require in excess of $10 billion in funding over two to three years.
However, rebuilding 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 Unanswered Issue of Government Backing
The idea of energy companies being paid back by the government has been repeatedly raised. However, concrete details on this proposal have not yet been provided.
Without clarity is the key reason behind the industry's reluctance. Operators seek guarantees against sovereign risk and the risk that a different president could renege on any promise.
“It is essential to be insured against nationalization, that we’ve witnessed in Venezuela before.”
Ultimately, while rhetorical confidence runs strong, the practical risks suggest a path of slow deliberation for any significant venture in the Venezuelan energy industry.
