Energy analysts have shown considerable doubt regarding recent statements that US oil giants will rapidly pump tens of billions of dollars to fix the country's broken oil infrastructure.
Requirement of Absolute Guarantees
Absent an “iron-clad guarantee” of complete repayment from the American government, experts believe international firms to proceed with great care.
“It seems too early to comment on any potential investments,” an official commented in response.
The aggressive timeline of under 18 months has been boldly outlined. Yet, expert analyses indicate a more cautious outlook.
A More Realistic Outlook
“It is likely going to take three years for any meaningful production bounce,” noted an energy analyst.
He suggested energy firms would likely spend:
- Year one: Navigating new regulatory frameworks.
- The second year: Commencing overhaul of facilities.
- The third year: Reaching a position to boost production.
The result could be an boost of around half a million barrels per day perhaps by 2029.
Appetite Compared to Appetite for Spending
Experts make a critical difference between firms' attention and their appetite to invest significantly.
“I think their interest is an eight, on a scale of ten. But their appetite is a much lower, because there is significant uncertainty yet.”
Seasoned observers in the region share this caution. They believe that firms will publicly express enthusiasm while actually moving with great care.
The Colossal Price Tag
The required outlay would be enormous. Research projections suggest that increasing production by between 500,000 and a million bpd would require over $10 billion in investment over two to three years.
But, returning production to historical levels of around 2.5 million barrels per day could require a staggering $80 billion to $90 billion over many more years.
The Unanswered Issue of Taxpayer Funding
The suggestion of energy companies being reimbursed by the US taxpayer has been often raised. But, formal assurances on any guarantee have so far not been provided.
Without certainty is the key reason for the industry's reluctance. Companies seek guarantees against nationalization and the risk that a subsequent administration could cancel any deal.
“You need to be protected from political change, that we’ve experienced in Venezuela before.”
Ultimately, while political confidence runs high, the operational risks suggest a road of extreme caution for potential significant investment in the country's oil sector.
