Market specialists have expressed deep doubt regarding optimistic claims that US oil giants will rapidly pump vast sums of dollars to revive the country's crumbling oil infrastructure.
Demand for Solid Assurances
Lacking an absolute assurance of complete repayment from the Washington, analysts expect multinational oil companies to move with great care.
“It seems hasty to speculate on any future business activities,” a representative said this weekend.
The aggressive timeline of less than 18 months was publicly suggested. However, expert analyses suggest a different picture.
A More Realistic Schedule
“It is likely going to take three years for any significant recovery in production,” said an industry expert.
Experts believe operators would likely spend:
- The first year: Sorting through new operating agreements.
- Year two: Beginning reconstruction of infrastructure.
- The third year: Reaching a position to significantly ramp up production.
The result could be an increase of around half a million bpd perhaps by 2029.
Appetite Compared to Willingness for Risk
There is a important separation between firms' attention and their readiness to commit significantly.
“I believe their attention is an eight, on a range of ten. But their willingness is a much lower, because there is no clarity yet.”
Seasoned diplomats in the sector echo this view. The expectation is that firms will publicly express enthusiasm while in practice acting with deliberate slowness.
The Enormous Cost
The required investment would be enormous. Independent analysis suggest that increasing production by between 500,000 and a million barrels per day would require more than $10 billion in investment over two to three years.
However, rebuilding output to historical levels of around 2.5 million barrels per day could require a monumental $80 billion to $90 billion over six or seven years.
The Outstanding Issue of Government Backing
The idea of firms being reimbursed by the federal government has been repeatedly raised. However, concrete details on any guarantee have not yet been announced.
The absence of a solid plan is the main reason for the industry's reluctance. Companies seek safeguards against nationalization and the risk that a subsequent government could cancel any promise.
“It is essential to be insured against nationalization, that we’ve experienced in Venezuela previously.”
Therefore, while rhetorical promises runs strong, the operational risks suggest a journey of slow deliberation for potential large-scale investment in the country's energy industry.
