Energy analysts have shown considerable doubt regarding recent claims that US oil giants will swiftly invest billions of dollars to revive the country's crumbling oil infrastructure.
Demand for Iron-Clad Guarantees
Lacking an “iron-clad guarantee” of financial backing from the Washington, specialists predict multinational oil companies to proceed with significant hesitation.
“It is premature to comment on any potential investments,” an official said this weekend.
The aggressive timeframe of less than a year and a half has been publicly suggested. Yet, expert analyses paint a more cautious outlook.
A Probable Schedule
“It’s probably going to take 36 months for any kind of output increase,” said one industry expert.
He suggested energy firms would likely spend:
- The first year: Sorting through new operating agreements.
- Following phase: Investing in overhaul of equipment.
- The third year: Starting to meaningfully increase production.
This would lead to an rise of around 500,000 bpd maybe by 2029.
Desire Versus Appetite for Spending
Analysts draw a key distinction between companies' curiosity and their readiness to commit substantially.
“In my view their curiosity is an high score, on a range of one to 10. However, their appetite is a four or five, because there is a lack of certainty yet.”
Experienced diplomats in the region share this sentiment. The expectation is that majors will politically talk up the opportunity while in practice moving with great care.
The Colossal Cost
The monetary investment would be enormous. Research analysis suggest that increasing production by between 500,000 and a million bpd would require more than $10 billion in funding over two to three years.
Yet, rebuilding production to historical levels of around 2.5 million barrels per day could require a massive $80 billion to $90 billion over many more years.
The Unanswered Question of Federal Guarantees
The prospect of oil giants being compensated by the US taxpayer has been often raised. Nevertheless, formal assurances on any guarantee have not yet been forthcoming.
This lack of clarity is the key impediment for the industry's reluctance. Companies seek protection against political risk and the possibility that a subsequent government could cancel any agreement.
“You need to be shielded from nationalization, that we’ve seen in Venezuela already.”
Ultimately, while political promises runs strong, the practical realities suggest a road of slow deliberation for potential major investment in the country's energy industry.
