Industry experts have shown deep skepticism regarding recent predictions that American energy majors will quickly invest billions of dollars to fix the country's dilapidated oil infrastructure.
Demand for Iron-Clad Guarantees
Without an absolute assurance of complete repayment from the US federal government, analysts expect international firms to act with significant hesitation.
“It would be hasty to comment on any upcoming plans,” a spokesperson said in response.
The aggressive timeframe of less than 18 months was publicly proposed. Yet, expert analyses suggest a more cautious outlook.
A More Realistic Outlook
“It’s probably going to take three years for any meaningful production bounce,” said one energy analyst.
Experts believe operators would likely spend:
- Initial phase: Securing new government and security contracts.
- Following phase: Beginning overhaul of facilities.
- Final phase: Starting to significantly ramp up yield.
This would lead to an rise of around 500,000 barrels per day perhaps by the end of the decade.
Appetite Compared to Appetite for Risk
Analysts draw a key distinction between companies' curiosity and their readiness to commit significantly.
“In my view their curiosity is an high score, on a range of ten. I think their readiness is a mid-range score, because there is a lack of certainty yet.”
Seasoned observers in the region reinforce this view. The expectation is that majors will politically call it fantastic while privately acting with great care.
The Colossal Price Tag
The monetary bill would be vast. Research analysis suggest that increasing production by between 500,000 and a million bpd would require over $10 billion in investment over several years.
But, restoring output to historical 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 Government Backing
The idea of energy companies being compensated by the US taxpayer has been often raised. However, specific plans on any guarantee have so far not been provided.
The absence of clarity is the primary reason for the industry's hesitation. Firms seek guarantees against nationalization and the risk that a future administration could renege on any deal.
“It is essential to be insured against sovereign risk, that we’ve witnessed in Venezuela before.”
Therefore, while political promises runs strong, the practical realities suggest a road of slow deliberation for any significant venture in the country's energy industry.
