Market specialists have voiced considerable doubt regarding optimistic statements that American large firms will swiftly commit billions of dollars to revive Venezuela's broken energy sector.
Demand for Solid Guarantees
Without an solid promise of complete repayment from the American government, experts believe international firms to proceed with significant hesitation.
“It is premature to comment on any future business activities,” a representative commented recently.
The ambitious timeframe of less than a year and a half has been boldly proposed. Nevertheless, expert analyses indicate a more cautious outlook.
A Likely Outlook
“It is likely going to take three years for any kind of output increase,” said one energy analyst.
Experts believe operators would likely spend:
- Initial phase: Sorting through new government and security contracts.
- Following phase: Commencing overhaul of facilities.
- Final phase: Reaching a position to meaningfully increase output.
The result could be an increase of around 500,000 barrels per day maybe by the end of the decade.
Desire Versus Readiness for Risk
Experts make a important separation between companies' curiosity and their readiness to commit significantly.
“I believe their interest is an eight, on a range of one to 10. I think their readiness is a mid-range score, because there is a lack of certainty yet.”
Experienced operators in the region echo this sentiment. The thinking is that majors will politically talk up the opportunity while in practice acting with deliberate slowness.
The Vast Investment Required
The monetary outlay would be vast. Independent analysis suggest that adding between 500,000 and a million bpd would require in excess of $10 billion in investment over two to three years.
But, returning output to peak levels of around 2.5 million barrels per day could require a monumental $80 billion to $90 billion over six or seven years.
The Unanswered Issue of Federal Guarantees
The prospect of energy companies being reimbursed by the federal government has been repeatedly floated. But, specific plans on any guarantee have not yet been forthcoming.
This lack of clarity is the main reason for the industry's hesitation. Operators seek protection against sovereign risk and the possibility that a different government could renege on any agreement.
“It is essential to be insured against sovereign risk, that we’ve experienced in Venezuela already.”
Ultimately, while political optimism runs high, the financial risks suggest a road of measured steps for potential significant venture in the Venezuelan energy industry.
