Market specialists have shown considerable skepticism regarding optimistic claims that American energy majors will rapidly commit billions of dollars to fix the country's crumbling energy sector.
Requirement of Iron-Clad Assurances
Absent an solid promise of complete repayment from the Washington, experts believe international firms to act with great care.
“It is premature to discuss any potential investments,” an official said in response.
The aggressive timeframe of less than 18 months has been publicly proposed. Yet, expert analyses paint a different picture.
A Likely Schedule
“It’s probably going to take 36 months for any kind of output increase,” commented an energy analyst.
Experts believe energy firms would likely spend:
- The first year: Sorting through new government and security contracts.
- Year two: Commencing reconstruction of equipment.
- The third year: Reaching a position to meaningfully increase output.
This suggests an increase of around 500,000 barrels per day maybe by late 2028.
Desire Versus Willingness for Investment
There is a critical difference between companies' curiosity and their willingness to spend significantly.
“I believe their attention is an high score, on a scale of ten. But their appetite is a much lower, because there is no clarity yet.”
Experienced observers in the region reinforce this view. The thinking is that firms will publicly talk up the opportunity while in practice acting with great care.
The Enormous Investment Required
The required outlay would be vast. Independent projections suggest that increasing production by between 500,000 and a million barrels per day would require in excess of $10 billion in funding over two to three years.
Yet, rebuilding production to previous levels of around 2.5 million barrels per day could require a massive $80 billion to $90 billion over six or seven years.
The Pending Question of Government Backing
The prospect of firms being reimbursed by the US taxpayer has been repeatedly mentioned. But, specific plans on any guarantee have not yet been announced.
This lack of clarity is the primary reason for the industry's caution. Firms seek protection against political risk and the risk that a different president could cancel any agreement.
“It is essential to be insured against political change, that we’ve experienced in Venezuela already.”
Ultimately, while political confidence runs high, the practical risks suggest a road of extreme caution for potential significant investment in the Venezuelan oil sector.
