Industry experts have expressed deep doubt regarding bullish predictions that American large firms will quickly commit billions of dollars to revive the country's broken energy sector.
Requirement of Iron-Clad Protections
Lacking an absolute assurance of complete repayment from the US federal government, analysts expect multinational oil companies to act with extreme caution.
“It would be too early to discuss any potential investments,” an official said this weekend.
The ambitious timeframe of less than 18 months has been boldly proposed. Nevertheless, industry projections paint a different picture.
A Likely Schedule
“It’s probably going to take three years for any significant output increase,” commented an chief investment officer.
He suggested operators would likely spend:
- The first year: Securing new operating agreements.
- The second year: Commencing overhaul of infrastructure.
- Final phase: Starting to meaningfully increase production.
This suggests an rise of around 500,000 bpd possibly by 2029.
Appetite Compared to Readiness for Investment
Experts make a important separation between companies' curiosity and their willingness to spend significantly.
“I think their attention is an high score, on a range of one to 10. But their willingness is a four or five, because there is a lack of certainty yet.”
Experienced diplomats in the region share this caution. The thinking is that companies will publicly express enthusiasm while actually moving with deliberate slowness.
The Enormous Price Tag
The financial outlay would be vast. University estimates suggest that increasing production by between half a million and a million barrels per day would require over $10 billion in investment over two to three years.
However, returning output to historical levels of around 2.5 million barrels per day could require a staggering $80 billion to $90 billion over many more years.
The Outstanding Issue of Government Backing
The suggestion of oil giants being compensated by the federal government has been repeatedly floated. But, specific plans on this proposal have so far not been forthcoming.
The absence of certainty is the key impediment behind the industry's caution. Companies seek protection against nationalization and the risk that a different president could cancel any deal.
“It is essential to be shielded from political change, that we’ve witnessed in Venezuela previously.”
Therefore, while rhetorical promises runs strong, the operational challenges suggest a path of extreme caution for potential major investment in the country's oil sector.
