Energy analysts have shown deep doubt regarding bullish claims that US large firms will rapidly pump billions of dollars to fix Venezuela's broken oil infrastructure.
Demand for Absolute Protections
Lacking an “iron-clad guarantee” of financial backing from the US federal government, analysts expect international firms to act with extreme caution.
“It is premature to discuss any upcoming plans,” a representative said in response.
The optimistic schedule of less than 18 months was boldly suggested. Nevertheless, expert analyses suggest a different picture.
A More Realistic Timeline
“It’s probably going to take 36 months for any meaningful output increase,” said one energy analyst.
He suggested operators would likely spend:
- Initial phase: Sorting through new regulatory frameworks.
- The second year: Commencing overhaul of infrastructure.
- Final phase: Starting to significantly ramp up output.
This suggests an increase of around half a million bpd perhaps by 2029.
Appetite Compared to Appetite for Risk
Experts make a important separation between firms' attention and their willingness to spend substantially.
“I believe their interest is an high score, on a scale of ten. However, their appetite is a four or five, because there is a lack of certainty yet.”
Veteran diplomats in the country reinforce this view. The expectation is that firms will publicly express enthusiasm while actually acting with deliberate slowness.
The Colossal Cost
The required outlay would be colossal. Independent estimates suggest that adding between 500,000 and a million bpd would require over $10 billion in investment over several years.
But, returning production to historical levels of around 2.5 million bpd could require a monumental $80 billion to $90 billion over six or seven years.
The Unanswered Question of Government Backing
The suggestion of firms being reimbursed by the federal government has been repeatedly floated. However, formal assurances on any guarantee have so far not been forthcoming.
Without certainty is the main reason for the industry's reluctance. Firms seek safeguards against political risk and the chance that a subsequent administration could refuse any promise.
“They must be insured against political change, that we’ve seen in Venezuela already.”
Therefore, while rhetorical promises runs high, the practical risks suggest a journey of extreme caution for any significant venture in the Venezuelan energy industry.
