Market specialists have expressed deep caution regarding recent predictions that US large firms will rapidly invest 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, analysts expect international firms to move with great care.
“It seems hasty to comment on any upcoming plans,” a spokesperson stated recently.
The ambitious schedule of less than 18 months has been publicly suggested. Yet, industry projections indicate a longer timeline.
A Likely Outlook
“Chances are going to take 36 months for any kind of production bounce,” commented one chief investment officer.
He suggested oil companies would likely spend:
- The first year: Securing new operating agreements.
- The second year: Beginning rebuilding of infrastructure.
- Year three: Being able to boost output.
This suggests an boost of around half a million barrels per day perhaps by the end of the decade.
Interest vs. Willingness for Risk
Experts make a critical difference between companies' curiosity and their willingness to spend substantially.
“In my view their interest is an high score, on a range of one to 10. But their readiness is a much lower, because there is no clarity yet.”
Veteran observers in the country share this sentiment. The thinking is that majors will publicly talk up the opportunity while actually proceeding with great care.
The Enormous Investment Required
The monetary investment would be colossal. Independent estimates suggest that adding between 500,000 and a million barrels per day would require over $10 billion in investment over several years.
But, returning production to historical levels of around 2.5 million barrels per day could require a staggering $80 billion to $90 billion over many more years.
The Unanswered Question of Taxpayer Funding
The idea of firms being compensated by the federal government has been repeatedly floated. However, specific plans on any guarantee have so far not been forthcoming.
Without a solid plan is the main reason behind the sector's hesitation. Firms seek safeguards against political risk and the risk that a subsequent administration could refuse any deal.
“You need to be insured against political change, that we’ve experienced in Venezuela before.”
Ultimately, while rhetorical promises runs strong, the practical challenges suggest a journey of measured steps for potential significant venture in the Venezuelan oil sector.
