Energy analysts have shown significant doubt regarding optimistic claims that American energy majors will quickly invest vast sums of dollars to rebuild the country's dilapidated production facilities.
Requirement of Solid Protections
Lacking an solid promise of full reimbursement from the Washington, analysts expect global energy giants to act with great care.
“It seems too early to speculate on any upcoming plans,” a representative commented this weekend.
The aggressive timeline of under a year and a half was publicly outlined. Yet, industry projections indicate a more cautious outlook.
A Likely Schedule
“It is likely going to take multiple years for any significant production bounce,” said an industry expert.
The analysis indicates energy firms would likely spend:
- Year one: Sorting through new government and security contracts.
- Following phase: Investing in reconstruction of infrastructure.
- Year three: Reaching a position to boost output.
This suggests an increase of around half a million barrels per day perhaps by the end of the decade.
Appetite Compared to Willingness for Spending
There is a key distinction between companies' curiosity and their willingness to spend heavily.
“I believe their attention is an eight, on a scale of one to 10. But their readiness is a much lower, because there is significant uncertainty yet.”
Seasoned operators in the region share this sentiment. They believe that companies will politically call it fantastic while actually proceeding with extreme caution.
The Vast Cost
The monetary bill would be vast. Independent analysis suggest that adding between half a million and a million bpd would require more than $10 billion in funding over several years.
But, rebuilding production to historical levels of around 2.5 million barrels per day could require a staggering $80 billion to $90 billion over many more years.
The Pending Question of Government Backing
The idea of energy companies being reimbursed by the US taxpayer has been repeatedly mentioned. Nevertheless, concrete details on this proposal have so far not been provided.
This lack of certainty is the primary impediment behind the industry's hesitation. Operators seek protection against nationalization and the risk that a subsequent president could renege on any deal.
“They must be insured against nationalization, that we’ve seen in Venezuela previously.”
Therefore, while political promises runs high, the operational risks suggest a road of extreme caution for any major financial commitment in the country's oil sector.
