Market specialists have voiced considerable skepticism regarding optimistic statements that US large firms will rapidly invest billions of dollars to rebuild the country's dilapidated oil infrastructure.
The Need for Absolute Protections
Absent an absolute assurance of full reimbursement from the US federal government, analysts expect multinational oil companies to act with great care.
“It seems too early to comment on any upcoming plans,” a representative said in response.
The ambitious timeline of under a year and a half has been boldly suggested. Yet, industry projections suggest a more cautious outlook.
A Likely Outlook
“Chances are going to take 36 months for any meaningful output increase,” said an energy analyst.
He suggested oil companies would likely spend:
- Year one: Sorting through new government and security contracts.
- The second year: Investing in overhaul of infrastructure.
- Year three: Reaching a position to significantly ramp up production.
This suggests an increase of around half a million barrels per day possibly by the end of the decade.
Desire Versus Willingness for Risk
Analysts draw a critical difference between companies' curiosity and their readiness to commit heavily.
“I think their attention is an high score, on a scale of ten. However, their readiness is a much lower, because there is a lack of certainty yet.”
Veteran operators in the country share this caution. The thinking is that majors will publicly call it fantastic while privately moving with extreme caution.
The Colossal Investment Required
The financial investment would be vast. Independent analysis suggest that adding between half a million and a million barrels per day would require over $10 billion in capital spending over two to three years.
However, restoring 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 Outstanding Issue of Government Backing
The idea of energy companies being compensated by the federal government has been often raised. But, concrete details on this proposal have so far not been provided.
Without a solid plan is the main impediment for the sector's caution. Companies seek guarantees against political risk and the chance that a future president could cancel any deal.
“They must be protected from political change, that we’ve experienced in Venezuela already.”
In summary, while rhetorical promises runs strong, the operational risks suggest a journey of slow deliberation for any significant investment in the country's energy industry.
