Energy analysts have expressed considerable skepticism regarding optimistic predictions that US oil giants will quickly commit billions of dollars to rebuild the country's broken oil infrastructure.
Requirement of Iron-Clad Protections
Absent an solid promise of full reimbursement from the American government, experts believe multinational oil companies to proceed with extreme caution.
“It would be premature to speculate on any future business activities,” a representative said in response.
The aggressive schedule of less than a year and a half has been boldly proposed. Yet, industry projections paint a more cautious outlook.
A Likely Schedule
“Chances are going to take multiple years for any meaningful output increase,” noted one industry expert.
Experts believe operators would likely spend:
- Year one: Securing new government and security contracts.
- Following phase: Investing in reconstruction of equipment.
- Year three: Reaching a position to meaningfully increase yield.
This suggests an rise of around half a million barrels per day maybe by the end of the decade.
Interest vs. Willingness for Spending
There is a critical difference between companies' curiosity and their appetite to invest substantially.
“In my view their attention is an high score, on a scale of ten. But their readiness is a mid-range score, because there is significant uncertainty yet.”
Experienced observers in the region share this view. The thinking is that firms will publicly call it fantastic while privately moving with extreme caution.
The Colossal Investment Required
The required bill would be vast. University estimates suggest that increasing production by between 500,000 and a million bpd would require over $10 billion in capital spending over several years.
But, returning output to historical levels of around 2.5 million barrels per day could require a monumental $80 billion to $90 billion over many more years.
The Pending Question of Federal Guarantees
The prospect of energy companies being reimbursed by the federal government has been often raised. However, specific plans on any guarantee have so far not been announced.
This lack of a solid plan is the main reason behind the sector's caution. Firms seek guarantees against nationalization and the possibility that a future administration could renege on any promise.
“It is essential to be insured against nationalization, that we’ve seen in Venezuela before.”
Therefore, while political confidence runs high, the financial realities suggest a road of slow deliberation for any major investment in the country's energy industry.
