Industry experts have voiced considerable skepticism regarding bullish claims that American energy majors will swiftly pump billions of dollars to fix the country's crumbling oil infrastructure.
The Need for Iron-Clad Assurances
Lacking an absolute assurance of financial backing from the US federal government, analysts expect international firms to act with significant hesitation.
“It would be hasty to comment on any future business activities,” a representative said in response.
The optimistic schedule of less than a year and a half was boldly suggested. However, realistic assessments suggest a different picture.
A Probable Schedule
“It’s probably going to take multiple years for any kind of recovery in production,” said an industry expert.
He suggested energy firms would likely spend:
- Year one: Navigating new government and security contracts.
- Following phase: Commencing overhaul of infrastructure.
- Year three: Being able to meaningfully increase production.
This suggests an increase of around 500,000 bpd maybe by the end of the decade.
Appetite Compared to Readiness for Investment
There is a key distinction between companies' curiosity and their readiness to commit significantly.
“I think their curiosity is an eight, on a scale of ten. But their appetite is a much lower, because there is no clarity yet.”
Experienced observers in the region share this view. The thinking is that companies will politically talk up the opportunity while in practice acting with great care.
The Vast Price Tag
The financial outlay would be enormous. University projections suggest that adding between half a million and a million bpd would require more than $10 billion in funding over two to three years.
However, returning production to peak levels of around 2.5 million barrels per day could require a monumental $80 billion to $90 billion over many more years.
The Unanswered Issue of Government Backing
The idea of firms being compensated by the federal government has been often mentioned. But, specific plans on this proposal have so far not been provided.
This lack of a solid plan is the main impediment behind the sector's hesitation. Operators seek safeguards against nationalization and the possibility that a subsequent administration could renege on any agreement.
“It is essential to be protected from sovereign risk, that we’ve witnessed in Venezuela previously.”
Ultimately, while rhetorical confidence runs strong, the operational risks suggest a road of extreme caution for potential large-scale venture in the country's energy industry.
