Market specialists have shown considerable doubt regarding bullish predictions that US oil giants will swiftly invest tens of billions of dollars to fix the country's dilapidated production facilities.
The Need for Iron-Clad Protections
Absent an “iron-clad guarantee” of financial backing from the Washington, experts believe multinational oil companies to act with extreme caution.
“It would be too early to discuss any potential investments,” a representative commented this weekend.
The optimistic schedule of less than a year and a half was publicly suggested. Yet, expert analyses paint a more cautious outlook.
A Likely Outlook
“It is likely going to take 36 months for any kind of production bounce,” said one chief investment officer.
Experts believe oil companies would likely spend:
- Initial phase: Securing new government and security contracts.
- Following phase: Investing in reconstruction of infrastructure.
- The third year: Being able to meaningfully increase output.
This would lead to an rise of around half a million barrels per day maybe by the end of the decade.
Interest vs. Willingness for Investment
There is a important separation between firms' attention and their readiness to commit significantly.
“In my view their interest is an high score, on a range of ten. But their willingness is a much lower, because there is significant uncertainty yet.”
Seasoned observers in the region echo this caution. The thinking is that majors will politically express enthusiasm while privately proceeding with deliberate slowness.
The Colossal Cost
The financial bill would be vast. University analysis suggest that increasing production by between half a million and a million bpd would require over $10 billion in funding over two to three years.
However, restoring production to peak levels of around 2.5 million bpd could require a staggering $80 billion to $90 billion over six or seven years.
The Pending Issue of Federal Guarantees
The prospect of firms being reimbursed by the federal government has been repeatedly mentioned. However, formal assurances on any guarantee have so far not been provided.
The absence of certainty is the primary impediment for the industry's caution. Operators seek protection against political risk and the risk that a future administration could refuse any promise.
“They must be insured against political change, that we’ve witnessed in Venezuela before.”
Ultimately, while rhetorical promises runs strong, the practical challenges suggest a road of extreme caution for any large-scale financial commitment in the country's energy industry.
