Industry experts have expressed considerable caution regarding recent claims that US energy majors will rapidly invest billions of dollars to fix the country's dilapidated production facilities.
Requirement of Solid Guarantees
Without an absolute assurance of complete repayment from the Washington, experts believe international firms to proceed with great care.
“It is premature to speculate on any upcoming plans,” a spokesperson stated this weekend.
The optimistic timeline of less than a year and a half was publicly suggested. Yet, industry projections suggest a longer timeline.
A Likely Schedule
“It’s probably going to take three years for any meaningful output increase,” commented an energy analyst.
He suggested oil companies would likely spend:
- The first year: Sorting through new government and security contracts.
- The second year: Beginning rebuilding of equipment.
- Final phase: Starting to boost output.
This suggests an boost of around 500,000 barrels per day possibly by the end of the decade.
Interest vs. Readiness for Risk
Experts make a important separation between companies' curiosity and their appetite to invest heavily.
“I think their curiosity is an eight, on a range of one to 10. But their readiness is a mid-range score, because there is no clarity yet.”
Veteran operators in the sector reinforce this sentiment. The thinking is that companies will politically talk up the opportunity while actually proceeding with extreme caution.
The Vast Investment Required
The financial outlay would be vast. Independent projections suggest that adding between half a million and a million bpd would require over $10 billion in capital spending over several years.
But, restoring production to peak levels of around 2.5 million barrels per day could require a massive $80 billion to $90 billion over many more years.
The Pending Question of Federal Guarantees
The suggestion of oil giants being reimbursed by the federal government has been often mentioned. However, specific plans on such a mechanism have so far not been forthcoming.
This lack of clarity is the main factor for the sector's reluctance. Operators seek protection against sovereign risk and the chance that a future government could renege on any agreement.
“It is essential to be protected from sovereign risk, that we’ve witnessed in Venezuela previously.”
In summary, while rhetorical promises runs strong, the operational risks suggest a road of extreme caution for any large-scale venture in the country's oil sector.
