Industry experts have voiced considerable skepticism regarding recent claims that American oil giants will quickly commit tens of billions of dollars to rebuild the country's crumbling oil infrastructure.
Requirement of Absolute Guarantees
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 speculate on any future business activities,” a spokesperson commented in response.
The optimistic schedule of less than 18 months was boldly outlined. Yet, realistic assessments paint a more cautious outlook.
A Likely Outlook
“It’s probably going to take 36 months for any significant output increase,” said an industry expert.
He suggested oil companies would likely spend:
- Year one: Navigating new government and security contracts.
- The second year: Beginning reconstruction of infrastructure.
- Final phase: Reaching a position to meaningfully increase yield.
This suggests an increase of around 500,000 bpd possibly by the end of the decade.
Appetite Compared to Readiness for Spending
Experts make a key distinction between firms' attention and their willingness to spend significantly.
“I think their interest is an high score, on a scale of ten. However, their readiness is a four or five, because there is significant uncertainty yet.”
Experienced operators in the sector echo this caution. The expectation is that companies will politically express enthusiasm while privately acting with extreme caution.
The Vast Investment Required
The financial outlay would be enormous. University analysis suggest that increasing production by between half a million and a million barrels per day would require in excess of $10 billion in funding over two to three years.
However, rebuilding production to previous levels of around 2.5 million barrels per day could require a monumental $80 billion to $90 billion over six or seven years.
The Pending Question of Government Backing
The suggestion of firms being compensated by the federal government has been often mentioned. But, formal assurances on this proposal have not yet been provided.
Without a solid plan is the key reason behind the sector's caution. Firms seek protection against nationalization and the risk that a future government could refuse any deal.
“It is essential to be insured against nationalization, that we’ve experienced in Venezuela before.”
Therefore, while rhetorical promises runs strong, the financial realities suggest a road of measured steps for potential major venture in the country's energy industry.
