Energy analysts have voiced significant caution regarding bullish predictions that American oil giants will swiftly pump tens of billions of dollars to rebuild the country's dilapidated oil infrastructure.
Requirement of Absolute Protections
Absent an solid promise of financial backing from the American government, analysts expect international firms to proceed with great care.
“It is premature to speculate on any potential investments,” a spokesperson said recently.
The optimistic timeframe of under a year and a half has been boldly suggested. Yet, realistic assessments paint a more cautious outlook.
A More Realistic Timeline
“Chances are going to take three years for any kind of recovery in production,” said one energy analyst.
He suggested oil companies would likely spend:
- Year one: Sorting through new operating agreements.
- Year two: Investing in overhaul of equipment.
- Year three: Starting to meaningfully increase production.
This would lead to an increase of around half a million barrels per day perhaps by the end of the decade.
Desire Versus Willingness for Investment
Experts make a critical difference between multinationals’ interest and their appetite to invest heavily.
“In my view their attention is an eight, on a range of ten. However, their readiness is a much lower, because there is significant uncertainty yet.”
Veteran operators in the country echo this caution. The thinking is that majors will publicly express enthusiasm while privately proceeding with great care.
The Colossal Price Tag
The required outlay would be enormous. Independent analysis suggest that increasing production by between 500,000 and a million barrels per day would require over $10 billion in funding over several years.
Yet, rebuilding production to historical levels of around 2.5 million barrels per day could require a monumental $80 billion to $90 billion over six or seven years.
The Unanswered Issue of Government Backing
The prospect of oil giants being compensated by the US taxpayer has been often floated. However, specific plans on such a mechanism have not yet been provided.
The absence of certainty is the primary impediment behind the sector's reluctance. Companies seek protection against political risk and the risk that a future president could cancel any deal.
“They must be shielded from political change, that we’ve witnessed in Venezuela already.”
Ultimately, while rhetorical promises runs strong, the operational realities suggest a road of measured steps for potential significant venture in the country's oil sector.
