Industry experts have voiced considerable skepticism regarding bullish statements that US energy majors will quickly invest tens of billions of dollars to fix the country's crumbling oil infrastructure.
The Need for Absolute Assurances
Absent an absolute assurance of full reimbursement from the Washington, specialists predict multinational oil companies to act with extreme caution.
“It seems hasty to comment on any future business activities,” an official stated recently.
The optimistic timeframe of less than a year and a half has been publicly proposed. However, realistic assessments paint a more cautious outlook.
A More Realistic Schedule
“It’s probably going to take 36 months for any kind of recovery in production,” commented one industry expert.
He suggested oil companies would likely spend:
- Initial phase: Sorting through new regulatory frameworks.
- Year two: Commencing overhaul of facilities.
- Final phase: Starting to boost output.
This would lead to an boost of around 500,000 barrels per day perhaps by 2029.
Appetite Compared to Appetite for Spending
There is a critical difference between companies' curiosity and their willingness to spend significantly.
“I believe their attention is an high score, on a scale of one to 10. I think their willingness is a four or five, because there is a lack of certainty yet.”
Seasoned diplomats in the region echo this view. The thinking is that firms will publicly talk up the opportunity while actually acting with extreme caution.
The Enormous Price Tag
The monetary investment would be enormous. Research analysis suggest that adding between 500,000 and a million bpd would require more than $10 billion in investment over several years.
But, rebuilding production to peak levels of around 2.5 million bpd could require a massive $80 billion to $90 billion over six or seven years.
The Outstanding Issue of Taxpayer Funding
The suggestion of energy companies being reimbursed by the US taxpayer has been often floated. However, formal assurances on any guarantee have not yet been announced.
The absence of clarity is the primary impediment behind the sector's caution. Operators seek safeguards against sovereign risk and the risk that a different administration could refuse any promise.
“It is essential to be protected from sovereign risk, that we’ve seen in Venezuela already.”
Ultimately, while political optimism runs strong, the practical realities suggest a path of slow deliberation for potential large-scale investment in the country's energy industry.
