(Bloomberg) – Investors betting on growth in Venezuela oil output will need deep pockets and patience, as aging infrastructure will require billions of dollars in spending, according to Australia and New Zealand Banking Group Ltd.
The regular timeframes to increase oil output are likely to be longer in Venezuela than elsewhere due to the challenges faced by the industry, strategists Daniel Hynes and Soni Kumari wrote in a note Tuesday. “As such, it would be hard to see any impact from increased investment in oil production before the end of the decade, even if the project evaluation process started immediately.”
Major final investment decisions typically take one to five years after an initial discovery, ANZ said. First oil then follows within 12 months to two years for onshore conventional reserves, but can stretch to nearly seven years for offshore projects.
Energy shares rallied following the dramatic capture of Venezuelan leader Nicolás Maduro by US forces over the weekend. The country is home to the world’s largest proven oil reserves and President Donald Trump is expecting U.S. oil companies to help revive production.
To maintain production of 1 MMbpd, the South American nation would also likely need more than the industry standard of roughly $5.5 billion in annual investment, ANZ said.
“Expansion CAPEX for conventional onshore deposits can range between $10,000–$30,000 per barrel per day of capacity,” the analysts wrote, referring to spending. “This would equate to $10 billion–$30 billion for an additional 1 million barrels per day capacity,” with the cost ballooning to as much as $60,000 per barrel per day for deepwater offshore projects.
Investors should also brace for the possibility of continued political instability in Venezuela with significant civil unrest and sustained U.S. sanctions on the country, ANZ said.
