🔗 Share this article

Industry experts have shown considerable skepticism regarding recent predictions that US energy majors will quickly invest billions of dollars to rebuild Venezuela's crumbling production facilities.

Requirement of Solid Protections

Lacking an absolute assurance of full reimbursement from the Washington, analysts expect global energy giants to act with significant hesitation.

“It is premature to speculate on any upcoming plans,” a spokesperson said in response.

The optimistic timeline of under 18 months has been boldly suggested. Nevertheless, expert analyses indicate a more cautious outlook.

A More Realistic Outlook

“Chances are going to take multiple years for any kind of output increase,” said one chief investment officer.

The analysis indicates oil companies would likely spend:

• The first year: Securing new regulatory frameworks.
• Following phase: Commencing reconstruction of equipment.
• Final phase: Reaching a position to boost production.

The result could be an rise of around 500,000 barrels per day perhaps by the end of the decade.

Interest vs. Willingness for Risk

There is a important separation between companies' curiosity and their willingness to spend heavily.

“I think their curiosity is an high score, on a scale of ten. I think their readiness is a mid-range score, because there is significant uncertainty yet.”

Experienced observers in the region share this caution. The thinking is that firms will politically call it fantastic while privately proceeding with extreme caution.

The Vast Cost

The financial investment would be vast. Independent analysis suggest that adding between half a million and a million barrels per day would require over $10 billion in capital spending over two to three years.

Yet, returning output to historical levels of around 2.5 million barrels per day could require a staggering $80 billion to $90 billion over many more years.

The Unanswered Question of Government Backing

The suggestion of oil giants being paid back by the government has been often raised. Nevertheless, specific plans on this proposal have not yet been announced.

Without certainty is the main factor behind the industry's hesitation. Firms seek protection against sovereign risk and the risk that a future administration could cancel any agreement.

“You need to be shielded from political change, that we’ve experienced in Venezuela already.”

Therefore, while rhetorical optimism runs high, the operational risks suggest a road of slow deliberation for any large-scale investment in the country's energy industry.