Energy analysts have expressed significant skepticism regarding bullish statements that US oil giants will rapidly invest billions of dollars to revive the country's crumbling oil infrastructure.
Demand for Iron-Clad Assurances
Absent an solid promise of full reimbursement from the American government, analysts expect global energy giants to act with great care.
“It is hasty to discuss any future business activities,” a representative stated this weekend.
The aggressive schedule of under a year and a half has been boldly outlined. Yet, industry projections indicate a more cautious outlook.
A Likely Outlook
“It is likely going to take three years for any meaningful recovery in production,” noted an industry expert.
He suggested oil companies would likely spend:
- Year one: Securing new operating agreements.
- Year two: Commencing rebuilding of facilities.
- The third year: Being able to significantly ramp up production.
The result could be an rise of around 500,000 barrels per day possibly by 2029.
Desire Versus Readiness for Spending
There is a critical difference between companies' curiosity and their willingness to spend significantly.
“I believe their curiosity is an eight, on a scale of one to 10. I think their appetite is a much lower, because there is significant uncertainty yet.”
Experienced operators in the sector echo this view. The thinking is that majors will publicly express enthusiasm while in practice moving with deliberate slowness.
The Vast Cost
The required bill would be vast. University analysis suggest that adding between 500,000 and a million barrels per day would require over $10 billion in funding over two to three years.
But, rebuilding production to historical levels of around 2.5 million barrels per day could require a massive $80 billion to $90 billion over six or seven years.
The Outstanding Issue of Government Backing
The prospect of oil giants being paid back by the government has been often floated. But, specific plans on this proposal have not yet been provided.
This lack of clarity is the primary factor for the industry's reluctance. Operators seek protection against political risk and the risk that a future president could cancel any promise.
“It is essential to be insured against nationalization, that we’ve experienced in Venezuela already.”
Ultimately, while political promises runs strong, the practical risks suggest a road of slow deliberation for any major investment in the Venezuelan oil sector.
