Industry experts have shown deep doubt regarding bullish claims that American large firms will quickly invest tens of billions of dollars to revive Venezuela's broken production facilities.
Demand for Absolute Protections
Absent an absolute assurance of full reimbursement from the US federal government, specialists predict international firms to move with great care.
“It seems too early to speculate on any future business activities,” an official commented recently.
The optimistic timeframe of less than 18 months has been boldly proposed. However, industry projections indicate a different picture.
A Likely Timeline
“It’s probably going to take 36 months for any meaningful production bounce,” noted one chief investment officer.
He suggested operators would likely spend:
- Year one: Sorting through new operating agreements.
- The second year: Commencing reconstruction of infrastructure.
- The third year: Reaching a position to meaningfully increase production.
The result could be an increase 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 heavily.
“I believe their curiosity is an high score, on a scale of one to 10. However, their appetite is a four or five, because there is no clarity yet.”
Seasoned diplomats in the sector echo this caution. They believe that firms will politically talk up the opportunity while privately acting with deliberate slowness.
The Colossal Price Tag
The financial investment would be vast. Independent analysis suggest that increasing production by between half a million and a million barrels per day would require more than $10 billion in capital spending over two to three years.
However, restoring production to historical levels of around 2.5 million bpd could require a massive $80 billion to $90 billion over six or seven years.
The Unanswered Issue of Government Backing
The suggestion of oil giants being compensated by the US taxpayer has been repeatedly raised. Nevertheless, specific plans on this proposal have not yet been forthcoming.
Without certainty is the primary factor behind the sector's hesitation. Companies seek guarantees against sovereign risk and the possibility that a different administration could cancel any deal.
“They must be shielded from political change, that we’ve experienced in Venezuela already.”
Therefore, while rhetorical confidence runs strong, the practical risks suggest a road of measured steps for any significant venture in the Venezuelan oil sector.
