Energy analysts have voiced considerable skepticism regarding optimistic statements that US energy majors will rapidly pump tens of billions of dollars to rebuild the country's dilapidated energy sector.
Demand for Iron-Clad Assurances
Absent an “iron-clad guarantee” of full reimbursement from the Washington, experts believe multinational oil companies to act with extreme caution.
“It is too early to comment on any potential investments,” a representative said recently.
The ambitious timeframe of less than a year and a half has been publicly suggested. However, expert analyses paint a different picture.
A Likely Timeline
“It is likely going to take multiple years for any kind of output increase,” noted one energy analyst.
He suggested energy firms would likely spend:
- The first year: Navigating new operating agreements.
- Year two: Commencing reconstruction of equipment.
- The third year: Reaching a position to boost yield.
This suggests an rise of around 500,000 barrels per day maybe by the end of the decade.
Interest vs. Appetite for Investment
Experts make a key distinction between companies' curiosity and their readiness to commit significantly.
“In my view their attention is an eight, on a scale of one to 10. But their appetite is a much lower, because there is a lack of certainty yet.”
Experienced diplomats in the sector share this sentiment. They believe that companies will politically talk up the opportunity while in practice acting with great care.
The Enormous Cost
The monetary bill would be vast. University projections suggest that increasing production by between half a million and a million bpd would require more than $10 billion in investment over two to three years.
However, rebuilding production to previous levels of around 2.5 million bpd could require a staggering $80 billion to $90 billion over six or seven years.
The Unanswered Question of Federal Guarantees
The idea of oil giants being paid back by the US taxpayer has been repeatedly mentioned. But, concrete details on any guarantee have so far not been provided.
Without a solid plan is the main reason for the sector's caution. Operators seek safeguards against nationalization and the possibility that a subsequent government could refuse any deal.
“You need to be insured against political change, that we’ve seen in Venezuela before.”
Ultimately, while political optimism runs high, the financial challenges suggest a road of extreme caution for any major investment in the country's oil sector.
