Market specialists have expressed considerable caution regarding recent claims that American oil giants will swiftly pump billions of dollars to fix the country's crumbling oil infrastructure.
Requirement of Solid Guarantees
Absent an “iron-clad guarantee” of full reimbursement from the US federal government, experts believe international firms to act with great care.
“It would be premature to comment on any upcoming plans,” a representative said in response.
The aggressive timeframe of under 18 months has been publicly proposed. However, expert analyses indicate a more cautious outlook.
A Likely Schedule
“It is likely going to take 36 months for any kind of output increase,” noted an industry expert.
He suggested energy firms would likely spend:
- The first year: Sorting through new government and security contracts.
- Following phase: Commencing overhaul of equipment.
- Final phase: Reaching a position to meaningfully increase output.
This would lead to an increase of around 500,000 barrels per day maybe by 2029.
Interest vs. Willingness for Spending
Experts make a important separation between companies' curiosity and their willingness to spend significantly.
“In my view their attention is an high score, on a range of one to 10. But their appetite is a mid-range score, because there is significant uncertainty yet.”
Veteran diplomats in the region echo this view. The thinking is that firms will publicly call it fantastic while privately acting with extreme caution.
The Vast Cost
The financial investment would be enormous. University projections suggest that adding between 500,000 and a million bpd would require more than $10 billion in capital spending over several years.
But, rebuilding production to peak levels of around 2.5 million barrels per day could require a massive $80 billion to $90 billion over six or seven years.
The Unanswered Question of Government Backing
The suggestion of oil giants being compensated by the federal government has been repeatedly mentioned. But, concrete details on any guarantee have not yet been provided.
This lack of certainty is the key reason for the industry's hesitation. Firms seek guarantees against sovereign risk and the risk that a future president could cancel any promise.
“You need to be protected from nationalization, that we’ve witnessed in Venezuela before.”
Therefore, while political promises runs strong, the financial challenges suggest a journey of extreme caution for any major financial commitment in the Venezuelan energy industry.
