Market specialists have voiced considerable doubt regarding optimistic claims that US oil giants will quickly invest tens of billions of dollars to revive the country's broken production facilities.
Requirement of Iron-Clad Guarantees
Without an solid promise of financial backing from the US federal government, specialists predict global energy giants to proceed with great care.
“It seems too early to discuss any upcoming plans,” an official said recently.
The ambitious timeline of under a year and a half was publicly suggested. However, realistic assessments indicate a longer timeline.
A More Realistic Schedule
“Chances are going to take three years for any kind of production bounce,” commented one energy analyst.
Experts believe operators would likely spend:
- Year one: Securing new government and security contracts.
- Year two: Commencing reconstruction of equipment.
- The third year: Reaching a position to meaningfully increase production.
This would lead to an rise of around 500,000 barrels per day perhaps by the end of the decade.
Desire Versus Willingness for Risk
Experts make a key distinction between companies' curiosity and their willingness to spend significantly.
“I think their attention is an eight, on a scale of one to 10. However, their appetite is a four or five, because there is significant uncertainty yet.”
Seasoned diplomats in the sector share this caution. The expectation is that companies will publicly talk up the opportunity while actually proceeding with extreme caution.
The Vast Cost
The required investment would be colossal. Research analysis suggest that increasing production by between 500,000 and a million bpd would require more than $10 billion in funding over several years.
But, rebuilding output to historical levels of around 2.5 million bpd could require a monumental $80 billion to $90 billion over six or seven years.
The Pending Issue of Government Backing
The prospect of firms being paid back by the federal government has been often floated. Nevertheless, concrete details on such a mechanism have so far not been provided.
Without certainty is the main reason for the industry's hesitation. Firms seek safeguards against political risk and the risk that a future government could refuse any promise.
“You need to be protected from nationalization, that we’ve witnessed in Venezuela before.”
Ultimately, while political promises runs high, the financial risks suggest a journey of extreme caution for potential major venture in the country's oil sector.
