The President's Ambitious Prediction on US Oil Investment in Venezuela Draws Industry Caution.

Industry experts have shown considerable skepticism regarding bullish statements that American oil giants will quickly pump billions of dollars to revive Venezuela's dilapidated production facilities.

Demand for Absolute Assurances

Without an solid promise of full reimbursement from the US federal government, experts believe international firms to proceed with great care.

“It is premature to comment on any future business activities,” a representative stated this weekend.

The ambitious timeline of under 18 months was boldly proposed. However, industry projections suggest a longer timeline.

A More Realistic Timeline

“It’s probably going to take three years for any kind of recovery in production,” said an chief investment officer.

He suggested operators would likely spend:

• Initial phase: Sorting through new operating agreements.
• Following phase: Beginning overhaul of equipment.
• Final phase: Being able to meaningfully increase output.

This suggests an boost of around half a million barrels per day possibly by the end of the decade.

Appetite Compared to Readiness for Risk

Experts make a important separation between companies' curiosity and their appetite to invest heavily.

“I believe their curiosity is an high score, on a range of one to 10. However, their appetite is a much lower, because there is significant uncertainty yet.”

Seasoned diplomats in the country reinforce this sentiment. The expectation is that majors will politically talk up the opportunity while actually moving with extreme caution.

The Enormous Cost

The required bill would be enormous. Research estimates suggest that increasing production by between 500,000 and a million bpd would require more than $10 billion in investment over two to three years.

But, restoring output 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 idea of firms being compensated by the US taxpayer has been often floated. Nevertheless, specific plans on any guarantee have so far not been announced.

Without certainty is the primary factor for the industry's caution. Firms seek protection against sovereign risk and the chance that a subsequent government could cancel any deal.

“They must be protected from nationalization, that we’ve experienced in Venezuela before.”

Therefore, while rhetorical promises runs high, the practical realities suggest a road of extreme caution for potential large-scale venture in the country's energy industry.