Industry experts have shown considerable skepticism regarding bullish claims that US large firms will swiftly commit tens of billions of dollars to revive the country's crumbling production facilities.
The Need for Iron-Clad Assurances
Lacking an solid promise of full reimbursement from the Washington, analysts expect global energy giants to move with extreme caution.
“It seems hasty to comment on any upcoming plans,” a spokesperson commented in response.
The aggressive timeframe of under a year and a half was boldly outlined. However, industry projections suggest a different picture.
A Likely Timeline
“It is likely going to take three years for any meaningful production bounce,” commented one energy analyst.
He suggested oil companies would likely spend:
- Initial phase: Securing new operating agreements.
- The second year: Commencing overhaul of infrastructure.
- The third year: Reaching a position to significantly ramp up output.
The result could be an increase of around 500,000 bpd possibly by the end of the decade.
Appetite Compared to Readiness for Investment
There is a critical difference between firms' attention and their willingness to spend substantially.
“I think their curiosity is an eight, on a range of one to 10. I think their willingness is a four or five, because there is significant uncertainty yet.”
Seasoned diplomats in the region share this view. The thinking is that firms will politically talk up the opportunity while actually moving with great care.
The Vast Investment Required
The financial investment would be vast. Research estimates suggest that adding between half a million and a million barrels per day would require over $10 billion in funding over several years.
Yet, rebuilding production to historical levels of around 2.5 million barrels per day could require a massive $80 billion to $90 billion over many more years.
The Outstanding Question of Federal Guarantees
The prospect of firms being reimbursed by the government has been often floated. But, formal assurances on this proposal have so far not been announced.
Without clarity is the primary reason for the sector's reluctance. Companies seek protection against political risk and the possibility that a subsequent president could renege on any promise.
“It is essential to be protected from political change, that we’ve experienced in Venezuela already.”
Ultimately, while rhetorical promises runs high, the financial realities suggest a road of measured steps for any significant investment in the country's oil sector.
