Industry experts have voiced considerable caution regarding optimistic claims that US large firms will rapidly pump billions of dollars to fix the country's crumbling oil infrastructure.
The Need for Iron-Clad Protections
Without an solid promise of full reimbursement from the US federal government, experts believe multinational oil companies to act with great care.
“It is premature to discuss any future business activities,” a representative said this weekend.
The aggressive timeframe of under 18 months was publicly proposed. Yet, expert analyses suggest a longer timeline.
A Probable Schedule
“It is likely going to take three years for any kind of output increase,” commented one chief investment officer.
The analysis indicates oil companies would likely spend:
- Year one: Navigating new government and security contracts.
- The second year: Beginning reconstruction of facilities.
- The third year: Reaching a position to significantly ramp up production.
The result could be an rise of around half a million bpd maybe by the end of the decade.
Appetite Compared to Readiness for Risk
Analysts draw a important separation between firms' attention and their willingness to spend substantially.
“I believe their attention is an eight, on a range of one to 10. However, their readiness is a four or five, because there is a lack of certainty yet.”
Seasoned diplomats in the country reinforce this view. The expectation is that majors will publicly express enthusiasm while actually proceeding with great care.
The Vast Price Tag
The financial bill would be vast. University estimates suggest that adding between half a million and a million barrels per day would require in excess of $10 billion in capital spending over two to three years.
However, returning production to previous levels of around 2.5 million barrels per day could require a staggering $80 billion to $90 billion over six or seven years.
The Outstanding Question of Federal Guarantees
The idea of firms being compensated by the federal government has been repeatedly floated. But, formal assurances on any guarantee have not yet been announced.
This lack of certainty is the main impediment for the industry's reluctance. Companies seek safeguards against political risk and the risk that a future government could refuse any deal.
“It is essential to be insured against political change, that we’ve seen in Venezuela before.”
Ultimately, while political optimism runs strong, the practical risks suggest a journey of extreme caution for any significant venture in the country's energy industry.
