Energy analysts have voiced deep doubt regarding optimistic statements that American large firms will swiftly invest tens of billions of dollars to rebuild Venezuela's crumbling energy sector.
Requirement of Solid Protections
Without an absolute assurance of complete repayment from the US federal government, analysts expect international firms to act with significant hesitation.
“It would be premature to speculate on any upcoming plans,” an official said this weekend.
The ambitious timeframe of less than 18 months was publicly suggested. However, expert analyses paint a different picture.
A Probable Schedule
“It’s probably going to take multiple years for any kind of recovery in production,” said one chief investment officer.
Experts believe energy firms would likely spend:
- The first year: Securing new government and security contracts.
- Following phase: Investing in reconstruction of facilities.
- Final phase: Being able to meaningfully increase output.
The result could be an increase of around half a million barrels per day perhaps by the end of the decade.
Interest vs. Appetite for Spending
There is a important separation between companies' curiosity and their willingness to spend substantially.
“I believe their interest is an high score, on a scale of one to 10. However, their appetite is a mid-range score, because there is significant uncertainty yet.”
Experienced diplomats in the country share this sentiment. They believe that companies will politically express enthusiasm while in practice acting with great care.
The Enormous Investment Required
The monetary bill would be colossal. Independent estimates suggest that increasing production by between half a million and a million bpd would require more than $10 billion in investment over several years.
But, restoring output to peak levels of around 2.5 million bpd could require a staggering $80 billion to $90 billion over many more years.
The Pending Question of Government Backing
The suggestion of energy companies being reimbursed by the federal government has been repeatedly mentioned. Nevertheless, concrete details on this proposal have so far not been provided.
Without clarity is the primary factor for the industry's reluctance. Operators seek protection against political risk and the risk that a different government could renege on any deal.
“They must be shielded from nationalization, that we’ve witnessed in Venezuela before.”
Ultimately, while political promises runs strong, the financial risks suggest a road of extreme caution for potential significant venture in the country's energy industry.
