Market specialists have expressed deep doubt regarding optimistic predictions that American energy majors will rapidly invest tens of billions of dollars to revive the country's crumbling oil infrastructure.
Requirement of Iron-Clad Protections
Without an absolute assurance of full reimbursement from the US federal government, experts believe multinational oil companies to proceed with great care.
“It is hasty to discuss any upcoming plans,” a spokesperson commented recently.
The ambitious timeframe of less than 18 months has been boldly proposed. However, expert analyses suggest a different picture.
A Probable Schedule
“It’s probably going to take three years for any meaningful production bounce,” said an industry expert.
Experts believe oil companies would likely spend:
- Year one: Securing new operating agreements.
- The second year: Investing in rebuilding of equipment.
- The third year: Starting to boost production.
The result could be an boost of around 500,000 barrels per day possibly by the end of the decade.
Appetite Compared to Readiness for Spending
Experts make a important separation between firms' attention and their appetite to invest significantly.
“In my view their attention is an high score, on a range of one to 10. I think their appetite is a much lower, because there is significant uncertainty yet.”
Experienced operators in the region reinforce this view. The expectation is that companies will publicly talk up the opportunity while privately moving with extreme caution.
The Colossal Investment Required
The required outlay would be vast. Research analysis suggest that increasing production by between 500,000 and a million bpd would require more than $10 billion in investment over several years.
But, restoring output to previous levels of around 2.5 million barrels per day could require a massive $80 billion to $90 billion over many more years.
The Pending Question of Government Backing
The idea of firms being paid back by the US taxpayer has been repeatedly mentioned. Nevertheless, formal assurances on such a mechanism have not yet been announced.
This lack of a solid plan is the key impediment for the sector's hesitation. Firms seek protection against sovereign risk and the risk that a different administration could renege on any agreement.
“It is essential to be protected from nationalization, that we’ve witnessed in Venezuela before.”
Therefore, while rhetorical promises runs high, the practical risks suggest a path of slow deliberation for potential significant financial commitment in the country's oil sector.
