Market specialists have voiced deep doubt regarding optimistic claims that US oil giants will rapidly commit billions of dollars to revive the country's dilapidated oil infrastructure.
Requirement of Iron-Clad Guarantees
Absent an solid promise of financial backing from the Washington, analysts expect international firms to act with significant hesitation.
“It seems premature to discuss any future business activities,” a representative stated this weekend.
The ambitious timeframe of under a year and a half was publicly suggested. However, expert analyses indicate a longer timeline.
A More Realistic Timeline
“Chances are going to take multiple years for any kind of production bounce,” commented one industry expert.
He suggested operators would likely spend:
- The first year: Securing new operating agreements.
- Year two: Beginning reconstruction of facilities.
- Final phase: Reaching a position to meaningfully increase production.
This suggests an rise of around half a million bpd possibly by 2029.
Desire Versus Willingness for Spending
There is a critical difference between multinationals’ interest and their readiness to commit substantially.
“In my view their attention is an high score, on a scale of one to 10. However, their readiness is a four or five, because there is significant uncertainty yet.”
Veteran diplomats in the country share this caution. The thinking is that majors will politically express enthusiasm while actually proceeding with great care.
The Vast Price Tag
The monetary bill would be enormous. Independent estimates suggest that increasing production by between half a million and a million barrels per day would require in excess of $10 billion in investment over two to three years.
However, restoring production to historical levels of around 2.5 million barrels per day could require a massive $80 billion to $90 billion over six or seven years.
The Pending Issue of Government Backing
The idea of firms being compensated by the US taxpayer has been often raised. However, concrete details on such a mechanism have not yet been provided.
This lack of certainty is the primary factor behind the sector's caution. Operators seek guarantees against political risk and the possibility that a subsequent president could refuse any deal.
“You need to be shielded from political change, that we’ve experienced in Venezuela already.”
In summary, while political promises runs high, the financial realities suggest a journey of extreme caution for any significant venture in the country's energy industry.
