Energy analysts have voiced considerable caution regarding optimistic claims that US oil giants will rapidly invest billions of dollars to fix the country's dilapidated energy sector.
Demand for Solid Protections
Lacking an solid promise of full reimbursement from the American government, experts believe global energy giants to act with extreme caution.
“It seems hasty to discuss any upcoming plans,” an official said in response.
The optimistic schedule of under 18 months was boldly proposed. However, industry projections paint a more cautious outlook.
A Probable Schedule
“It is likely going to take multiple years for any kind of production bounce,” said one energy analyst.
He suggested oil companies would likely spend:
- The first year: Navigating new government and security contracts.
- Year two: Beginning overhaul of facilities.
- Year three: Reaching a position to meaningfully increase output.
This would lead to an increase of around half a million bpd perhaps by the end of the decade.
Desire Versus Willingness for Spending
Experts make a important separation between multinationals’ interest and their readiness to commit significantly.
“In my view their curiosity is an high score, on a scale of one to 10. But their readiness is a mid-range score, because there is a lack of certainty yet.”
Experienced observers in the region echo this caution. The thinking is that majors will publicly talk up the opportunity while in practice moving with great care.
The Enormous Investment Required
The financial investment would be enormous. University projections suggest that increasing production by between 500,000 and a million bpd would require more than $10 billion in investment over two to three years.
However, restoring output to historical levels of around 2.5 million barrels per day could require a massive $80 billion to $90 billion over six or seven years.
The Outstanding Question of Government Backing
The idea of energy companies being paid back by the federal government has been often raised. However, formal assurances on any guarantee have so far not been forthcoming.
This lack of clarity is the primary reason for the industry's caution. Firms seek protection against nationalization and the risk that a future government could renege on any agreement.
“It is essential to be insured against sovereign risk, that we’ve experienced in Venezuela previously.”
In summary, while rhetorical promises runs high, the operational realities suggest a path of measured steps for any significant financial commitment in the country's oil sector.
