Industry experts have shown deep skepticism regarding bullish statements that US oil giants will quickly pump vast sums of dollars to revive the country's broken oil infrastructure.
Demand for Iron-Clad Assurances
Lacking an solid promise of financial backing from the US federal government, experts believe international firms to act with extreme caution.
“It is hasty to comment on any upcoming plans,” an official stated in response.
The optimistic timeframe of less than 18 months was boldly suggested. Yet, industry projections indicate a longer timeline.
A Likely Schedule
“It’s probably going to take multiple years for any significant output increase,” commented one industry expert.
He suggested operators would likely spend:
- Year one: Sorting through new operating agreements.
- The second year: Investing in rebuilding of equipment.
- Year three: Starting to meaningfully increase yield.
This would lead to an increase of around half a million barrels per day perhaps by the end of the decade.
Interest vs. Willingness for Risk
There is a critical difference between companies' curiosity and their appetite to invest heavily.
“In my view their interest is an high score, on a range of one to 10. But their readiness is a much lower, because there is significant uncertainty yet.”
Seasoned diplomats in the country share this sentiment. The thinking is that firms will politically express enthusiasm while privately proceeding with extreme caution.
The Colossal Cost
The monetary investment would be vast. Independent estimates suggest that adding between half a million and a million barrels per day would require more than $10 billion in funding over several years.
Yet, rebuilding production to previous levels of around 2.5 million bpd could require a monumental $80 billion to $90 billion over six or seven years.
The Unanswered Question of Taxpayer Funding
The idea of oil giants being compensated by the federal government has been repeatedly floated. But, concrete details on such a mechanism have not yet been announced.
Without clarity is the key factor for the sector's hesitation. Firms seek guarantees against sovereign risk and the chance that a subsequent administration could refuse any promise.
“It is essential to be protected from sovereign risk, that we’ve experienced in Venezuela previously.”
Ultimately, while political promises runs strong, the financial challenges suggest a path of extreme caution for any major venture in the country's energy industry.
