Energy analysts have voiced considerable caution regarding bullish claims that US large firms will rapidly pump billions of dollars to revive the country's broken energy sector.
The Need for Solid Guarantees
Absent an absolute assurance of financial backing from the Washington, experts believe multinational oil companies to act with extreme caution.
“It seems too early to speculate on any upcoming plans,” a spokesperson commented recently.
The aggressive schedule of less than 18 months has been publicly proposed. However, industry projections paint a longer timeline.
A More Realistic Schedule
“It is likely going to take three years for any significant output increase,” said an chief investment officer.
He suggested oil companies would likely spend:
- The first year: Navigating new operating agreements.
- Following phase: Commencing rebuilding of infrastructure.
- Year three: Being able to significantly ramp up yield.
This would lead to an increase of around half a million barrels per day possibly by the end of the decade.
Interest vs. Willingness for Spending
Experts make a critical difference between firms' attention and their appetite to invest significantly.
“In my view their attention is an eight, on a scale of ten. However, their readiness is a four or five, because there is significant uncertainty yet.”
Seasoned operators in the sector share this caution. They believe that companies will politically express enthusiasm while in practice moving with deliberate slowness.
The Enormous Cost
The monetary investment would be colossal. Independent analysis suggest that adding between half a million and a million bpd would require more than $10 billion in investment over two to three years.
Yet, returning production to historical levels of around 2.5 million barrels per day could require a staggering $80 billion to $90 billion over six or seven years.
The Unanswered Issue of Government Backing
The prospect of energy companies being paid back by the government has been repeatedly raised. However, specific plans on any guarantee have not yet been forthcoming.
Without clarity is the key impediment behind the industry's hesitation. Firms seek guarantees against nationalization and the risk that a different president could refuse any deal.
“It is essential to be insured against sovereign risk, that we’ve experienced in Venezuela before.”
Ultimately, while rhetorical optimism runs strong, the financial challenges suggest a road of measured steps for potential major financial commitment in the Venezuelan oil sector.
