Industry experts have expressed deep skepticism regarding bullish statements that American energy majors will rapidly commit tens of billions of dollars to revive the country's crumbling production facilities.
Demand for Solid Protections
Without an solid promise of complete repayment from the US federal government, analysts expect global energy giants to move with extreme caution.
“It would be too early to discuss any future business activities,” a spokesperson said this weekend.
The ambitious timeline of less than a year and a half was publicly suggested. However, realistic assessments indicate a longer timeline.
A Likely Timeline
“Chances are going to take 36 months for any significant production bounce,” noted an chief investment officer.
He suggested oil companies would likely spend:
- Year one: Navigating new operating agreements.
- The second year: Beginning overhaul of facilities.
- Year three: Being able to meaningfully increase production.
This would lead to an increase of around half a million barrels per day maybe by the end of the decade.
Appetite Compared to Readiness for Investment
Analysts draw a key distinction between firms' attention and their appetite to invest significantly.
“I believe their interest is an high score, on a range of ten. I think their willingness is a four or five, because there is a lack of certainty yet.”
Veteran diplomats in the country share this caution. They believe that majors will politically talk up the opportunity while privately acting with great care.
The Vast Cost
The financial bill would be colossal. Independent estimates suggest that increasing production by between 500,000 and a million barrels per day would require more than $10 billion in investment over several years.
Yet, restoring 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 Issue of Federal Guarantees
The prospect of oil giants being paid back by the federal government has been repeatedly mentioned. But, concrete details on this proposal have not yet been provided.
This lack of certainty is the main factor for the industry's caution. Companies seek guarantees against sovereign risk and the possibility that a subsequent government could renege on any deal.
“You need to be protected from political change, that we’ve seen in Venezuela already.”
Therefore, while rhetorical confidence runs high, the operational risks suggest a journey of slow deliberation for any significant investment in the country's oil sector.
