Energy analysts have voiced significant caution regarding recent predictions that US oil giants will rapidly pump tens of billions of dollars to fix the country's crumbling oil infrastructure.
Requirement of Absolute Assurances
Lacking an solid promise of financial backing from the Washington, analysts expect international firms to move with extreme caution.
“It would be premature to discuss any potential investments,” a spokesperson commented this weekend.
The aggressive timeframe of less than 18 months has been boldly outlined. Yet, expert analyses indicate a more cautious outlook.
A Likely Outlook
“Chances are going to take 36 months for any significant production bounce,” commented an industry expert.
Experts believe energy firms would likely spend:
- Year one: Sorting through new operating agreements.
- Year two: Commencing rebuilding of equipment.
- Final phase: Being able to boost production.
The result could be an boost of around 500,000 barrels per day possibly by the end of the decade.
Desire Versus Appetite for Investment
There is a critical difference between companies' curiosity and their appetite to invest significantly.
“I think their curiosity is an high score, on a scale of one to 10. But their readiness is a mid-range score, because there is a lack of certainty yet.”
Experienced diplomats in the sector echo this sentiment. The expectation is that companies will publicly talk up the opportunity while actually acting with extreme caution.
The Enormous Cost
The monetary outlay would be enormous. Independent analysis suggest that adding between half a million and a million barrels per day would require more than $10 billion in investment over two to three years.
Yet, 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 Government Backing
The suggestion of oil giants being compensated by the government has been repeatedly floated. However, specific plans on such a mechanism have not yet been forthcoming.
Without clarity is the key reason behind the industry's caution. Operators seek safeguards against political risk and the possibility that a subsequent administration could refuse any agreement.
“It is essential to be shielded from nationalization, that we’ve experienced in Venezuela previously.”
In summary, while rhetorical confidence runs strong, the financial challenges suggest a path of extreme caution for any major venture in the country's oil sector.
