Energy analysts have voiced significant doubt regarding bullish statements that US energy majors will rapidly commit vast sums of dollars to revive the country's dilapidated oil infrastructure.
Demand for Absolute Assurances
Lacking an absolute assurance of complete repayment from the Washington, specialists predict international firms to move with extreme caution.
“It is too early to comment on any upcoming plans,” an official commented in response.
The ambitious timeline of less than a year and a half has been boldly proposed. Yet, realistic assessments paint a more cautious outlook.
A More Realistic Outlook
“Chances are going to take three years for any meaningful output increase,” said an industry expert.
He suggested energy firms would likely spend:
- Initial phase: Navigating new government and security contracts.
- The second year: Investing in reconstruction of equipment.
- Final phase: Starting to significantly ramp up production.
This suggests an boost of around half a million barrels per day possibly by the end of the decade.
Appetite Compared to Appetite for Spending
Analysts draw a important separation between companies' curiosity and their readiness to commit substantially.
“I believe their curiosity is an eight, on a range of one to 10. I think their readiness is a much lower, because there is no clarity yet.”
Experienced diplomats in the country echo this view. They believe that firms will publicly talk up the opportunity while actually moving with extreme caution.
The Colossal Price Tag
The required bill would be enormous. Independent estimates suggest that increasing production by between half a million and a million barrels per day would require more than $10 billion in capital spending over two to three years.
But, returning production to peak levels of around 2.5 million barrels per day could require a massive $80 billion to $90 billion over six or seven years.
The Pending Question of Taxpayer Funding
The idea of oil giants being compensated by the US taxpayer has been often raised. But, formal assurances on such a mechanism have so far not been forthcoming.
This lack of clarity is the main factor behind the industry's hesitation. Companies seek protection against sovereign risk and the chance that a subsequent president could refuse any promise.
“You need to be shielded from sovereign risk, that we’ve witnessed in Venezuela before.”
Ultimately, while rhetorical confidence runs strong, the practical challenges suggest a road of extreme caution for any major investment in the country's oil sector.
