Industry experts have shown considerable doubt regarding optimistic statements that US large firms will quickly invest billions of dollars to fix the country's dilapidated production facilities.
Demand for Solid Guarantees
Without an “iron-clad guarantee” of full reimbursement from the US federal government, experts believe multinational oil companies to act with extreme caution.
“It seems too early to comment on any upcoming plans,” a representative commented this weekend.
The aggressive timeline of under 18 months was publicly outlined. However, realistic assessments indicate a more cautious outlook.
A More Realistic Timeline
“It’s probably going to take multiple years for any kind of production bounce,” said an chief investment officer.
He suggested operators would likely spend:
- Year one: Sorting through new operating agreements.
- The second year: Commencing reconstruction of infrastructure.
- Year three: Reaching a position to meaningfully increase output.
This suggests an increase of around half a million bpd possibly by the end of the decade.
Appetite Compared to Readiness for Investment
Experts make a important separation between companies' curiosity and their willingness to spend heavily.
“I think their interest is an eight, on a scale of ten. But their readiness is a mid-range score, because there is a lack of certainty yet.”
Veteran observers in the region echo this view. The thinking is that majors will publicly talk up the opportunity while privately acting with extreme caution.
The Enormous Cost
The required investment would be colossal. Research projections suggest that adding between 500,000 and a million barrels per day would require in excess of $10 billion in funding over several years.
Yet, rebuilding production to previous levels of around 2.5 million barrels per day could require a massive $80 billion to $90 billion over many more years.
The Pending Question of Taxpayer Funding
The idea of energy companies being paid back by the government has been often mentioned. Nevertheless, specific plans on this proposal have not yet been announced.
Without a solid plan is the main factor for the industry's hesitation. Companies seek guarantees against nationalization and the possibility that a future president could refuse any deal.
“You need to be insured against sovereign risk, that we’ve witnessed in Venezuela already.”
Therefore, while rhetorical optimism runs high, the operational challenges suggest a journey of slow deliberation for potential major venture in the country's oil sector.
