Industry experts have shown deep skepticism regarding bullish claims that American oil giants will quickly invest tens of billions of dollars to rebuild the country's crumbling oil infrastructure.
The Need for Absolute Guarantees
Lacking an absolute assurance of full reimbursement from the American government, analysts expect international firms to act with extreme caution.
“It seems too early to speculate on any future business activities,” an official said recently.
The optimistic schedule of under 18 months was boldly proposed. Nevertheless, industry projections suggest a longer timeline.
A More Realistic Schedule
“It is likely going to take 36 months for any significant recovery in production,” said one energy analyst.
The analysis indicates oil companies would likely spend:
- Initial phase: Securing new government and security contracts.
- The second year: Commencing overhaul of equipment.
- The third year: Reaching a position to meaningfully increase production.
This suggests an increase of around 500,000 bpd perhaps by the end of the decade.
Appetite Compared to Willingness for Risk
Analysts draw a key distinction between firms' attention and their appetite to invest significantly.
“In my view their attention is an eight, on a range of one to 10. I think their willingness is a much lower, because there is significant uncertainty yet.”
Seasoned observers in the country share this view. They believe that companies will politically talk up the opportunity while actually proceeding with extreme caution.
The Enormous Price Tag
The financial outlay would be colossal. Independent analysis suggest that increasing production by between half a million and a million bpd would require over $10 billion in funding over two to three years.
Yet, rebuilding output 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 Unanswered Issue of Government Backing
The prospect of oil giants being compensated by the US taxpayer has been repeatedly floated. But, formal assurances on such a mechanism have not yet been forthcoming.
This lack of clarity is the primary impediment behind the sector's caution. Companies seek guarantees against sovereign risk and the risk that a different president could cancel any agreement.
“You need to be protected from nationalization, that we’ve seen in Venezuela before.”
Therefore, while rhetorical promises runs strong, the operational risks suggest a road of measured steps for any significant financial commitment in the country's energy industry.
