Industry experts have voiced deep doubt regarding recent claims that American energy majors will rapidly invest billions of dollars to rebuild the country's broken production facilities.
Demand for Absolute Guarantees
Lacking an solid promise of financial backing from the Washington, analysts expect multinational oil companies to proceed with extreme caution.
“It would be too early to speculate on any upcoming plans,” an official commented this weekend.
The optimistic timeline of less than a year and a half was boldly suggested. Nevertheless, expert analyses suggest a more cautious outlook.
A Probable Outlook
“It’s probably going to take three years for any kind of recovery in production,” commented one chief investment officer.
He suggested energy firms would likely spend:
- The first year: Sorting through new operating agreements.
- Year two: Investing in overhaul of infrastructure.
- The third year: Reaching a position to significantly ramp up production.
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 Spending
Experts make a critical difference between firms' attention and their appetite to invest significantly.
“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 significant uncertainty yet.”
Seasoned diplomats in the region share this caution. The expectation is that companies will politically express enthusiasm while privately proceeding with deliberate slowness.
The Enormous Price Tag
The required bill would be colossal. University analysis suggest that adding between half a million and a million bpd would require more than $10 billion in investment over two to three years.
But, restoring production to previous levels of around 2.5 million bpd could require a monumental $80 billion to $90 billion over many more years.
The Pending Issue of Government Backing
The idea of oil giants being reimbursed by the federal government has been often mentioned. But, formal assurances on any guarantee have not yet been provided.
This lack of a solid plan is the primary impediment behind the sector's reluctance. Companies seek guarantees against nationalization and the chance that a subsequent administration could refuse any promise.
“It is essential to be insured against nationalization, that we’ve experienced in Venezuela previously.”
In summary, while rhetorical optimism runs strong, the financial risks suggest a road of extreme caution for potential major financial commitment in the country's energy industry.
