Industry experts have voiced considerable caution regarding recent predictions that US large firms will quickly invest vast sums of dollars to fix the country's broken production facilities.
The Need for Absolute Protections
Absent an “iron-clad guarantee” of complete repayment from the Washington, analysts expect multinational oil companies to act with great care.
“It is premature to speculate on any potential investments,” an official commented this weekend.
The aggressive timeframe of less than a year and a half has been boldly suggested. Nevertheless, realistic assessments suggest a more cautious outlook.
A Probable Schedule
“Chances are going to take multiple years for any meaningful output increase,” commented one industry expert.
He suggested energy firms would likely spend:
- Initial phase: Sorting through new operating agreements.
- The second year: Commencing overhaul of equipment.
- Final phase: Being able to significantly ramp up production.
The result could be an rise of around 500,000 bpd possibly by the end of the decade.
Appetite Compared to Willingness for Spending
Experts make a critical difference between multinationals’ interest and their willingness to spend substantially.
“I think their attention is an high score, on a range of ten. However, their readiness is a much lower, because there is significant uncertainty yet.”
Experienced observers in the region reinforce this view. The expectation is that firms will politically call it fantastic while privately acting with extreme caution.
The Colossal Price Tag
The monetary investment would be colossal. Independent analysis suggest that adding between half a million and a million bpd would require in excess of $10 billion in funding over several years.
Yet, returning production to previous 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 Government Backing
The idea of firms being compensated by the federal government has been often raised. However, specific plans on any guarantee have so far not been provided.
This lack of certainty is the key reason behind the sector's caution. Companies seek protection against nationalization and the risk that a different administration could refuse any promise.
“They must be protected from sovereign risk, that we’ve seen in Venezuela already.”
In summary, while rhetorical promises runs high, the practical challenges suggest a path of slow deliberation for potential large-scale venture in the Venezuelan oil sector.
