Industry experts have shown deep doubt regarding optimistic claims that US large firms will rapidly pump billions of dollars to revive Venezuela's crumbling energy sector.
Requirement of Iron-Clad Assurances
Lacking an solid promise of financial backing from the Washington, specialists predict international firms to act with significant hesitation.
“It is hasty to comment on any future business activities,” a representative said recently.
The optimistic schedule of less than 18 months was boldly proposed. Nevertheless, industry projections suggest a more cautious outlook.
A Likely Timeline
“It is likely going to take 36 months for any meaningful production bounce,” noted one industry expert.
He suggested energy firms would likely spend:
- The first year: Sorting through new government and security contracts.
- Year two: Commencing rebuilding of equipment.
- Year three: Starting to significantly ramp up yield.
This suggests an increase of around half a million barrels per day possibly by the end of the decade.
Desire Versus Willingness for Investment
There is a critical difference between firms' attention and their readiness to commit substantially.
“I think their curiosity is an eight, on a range of one to 10. But their willingness is a four or five, because there is a lack of certainty yet.”
Seasoned observers in the region echo this caution. The expectation is that companies will politically talk up the opportunity while privately acting with great care.
The Enormous Price Tag
The monetary investment would be vast. Independent estimates suggest that adding between half a million and a million bpd would require in excess of $10 billion in capital spending over several years.
Yet, rebuilding production to peak levels of around 2.5 million bpd could require a monumental $80 billion to $90 billion over six or seven years.
The Outstanding Question of Government Backing
The idea of energy companies being paid back by the government has been often floated. However, specific plans on such a mechanism have so far not been forthcoming.
The absence of certainty is the key factor behind the sector's reluctance. Firms seek guarantees against sovereign risk and the possibility that a future government could cancel any agreement.
“It is essential to be insured against political change, that we’ve experienced in Venezuela before.”
Therefore, while political optimism runs high, the operational risks suggest a road of slow deliberation for any large-scale venture in the country's energy industry.
