Market specialists have voiced deep caution regarding bullish statements that American energy majors will quickly pump tens of billions of dollars to fix Venezuela's dilapidated production facilities.
Demand for Solid Guarantees
Without an absolute assurance of full reimbursement from the American government, specialists predict international firms to move with extreme caution.
“It would be too early to comment on any upcoming plans,” a representative stated in response.
The aggressive timeframe of less than a year and a half has been boldly outlined. However, expert analyses indicate a more cautious outlook.
A More Realistic Schedule
“It is likely going to take multiple years for any significant output increase,” commented one chief investment officer.
He suggested energy firms would likely spend:
- Year one: Sorting through new regulatory frameworks.
- Following phase: Beginning overhaul of equipment.
- Year three: Reaching a position to significantly ramp up production.
This suggests an increase of around half a million barrels per day possibly by 2029.
Desire Versus Readiness for Risk
Experts make a critical difference between firms' attention and their willingness to spend substantially.
“I think their attention is an high score, on a scale of ten. I think their willingness is a mid-range score, because there is no clarity yet.”
Veteran observers in the country reinforce this caution. The expectation is that firms will publicly express enthusiasm while actually acting with deliberate slowness.
The Colossal Investment Required
The financial bill would be vast. Research analysis suggest that increasing production by between half a million and a million barrels per day would require in excess of $10 billion in funding over two to three years.
But, restoring output to historical levels of around 2.5 million bpd could require a staggering $80 billion to $90 billion over six or seven years.
The Outstanding Question of Federal Guarantees
The suggestion of firms being reimbursed by the government has been repeatedly raised. Nevertheless, concrete details on any guarantee have not yet been forthcoming.
The absence of a solid plan is the primary reason for the industry's caution. Firms seek protection against nationalization and the risk that a subsequent president could refuse any agreement.
“It is essential to be shielded from political change, that we’ve experienced in Venezuela before.”
Therefore, while rhetorical promises runs strong, the financial risks suggest a road of extreme caution for any large-scale investment in the country's energy industry.
