Bloomberg: An increase in Venezuela’s oil production is unlikely until at least the end of the decade

Statue in Caracas, Venezuela. Photo: Getty Images

Analysts warn that a significant increase in Venezuela’s oil production is unlikely to happen before the end of the decade due to aging infrastructure, high investment costs and political risks. Even if new projects are launched immediately, investors will have to wait for years.

Source: Bloomberg with reference to the analytical note of Australia and New Zealand Banking Group Ltd.

Details: ANZ strategists Daniel Hynes and Soni Kumari note that the standard timeline for increasing oil production in Venezuela will be significantly longer than in other countries. The reason is the structural problems of the industry, including outdated infrastructure and a chronic lack of investment. According to their estimates, even if development of new projects begins immediately, the real impact on production volumes is unlikely to be felt until the end of the decade.

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ANZ notes that final investment decisions on oil production projects typically take one to five years after a field is discovered. For onshore conventional fields, the first oil can appear after 12-24 months, while for offshore projects this period can stretch up to seven years.

Despite the fact that Venezuela has the world’s largest proven oil reserves, the recovery of the industry requires significant financial infusions. ANZ estimates that even to maintain production at around 1 million barrels per day, the country will need investment in excess of the industry standard of $5.5 billion per year.

Capital costs for the expansion of traditional land deposits in Venezuela can range from $10,000 to $30,000 for each barrel of daily capacity. For deep-water marine projects, costs can rise to $60,000 per barrel of daily capacity.

Expectations regarding the recovery of Venezuelan oil production are also related to the political factor. US President Donald Trump previously expressed hope that American oil companies would join the revival of the industry. At the same time, ANZ warns investors against excessive optimism.

Literally: “Investors should be prepared for possible prolonged political instability in Venezuela, accompanied by significant civil unrest and prolonged US sanctions against the country, according to ANZ.”

Prehistory:

• American on Saturday special unit “Delta” captured Venezuelan leader Nicolás Maduro and took him to the United States.
• Trump said that the United States will rule Venezuelauntil a clear and safe transition of power takes place there.
• On January 5, the US president said that in the short term, he needs the vice president of Venezuela, who is entrusted with the duties of the head of state, Delsey Rodríguez to give the United States “full access” to resources. In case of refusal, Trump threatened Rodriguez “at a very high price” if she “doesn’t do the right thing.”

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