Industry experts have voiced considerable doubt regarding recent statements that US energy majors will quickly invest billions of dollars to fix the country's dilapidated oil infrastructure.
Demand for Solid Protections
Absent an absolute assurance of full reimbursement from the Washington, analysts expect international firms to act with great care.
“It seems too early to speculate on any upcoming plans,” an official said in response.
The optimistic schedule of less than 18 months has been boldly outlined. Yet, industry projections paint a different picture.
A More Realistic Schedule
“It is likely going to take three years for any kind of output increase,” commented one chief investment officer.
The analysis indicates operators would likely spend:
- The first year: Sorting through new operating agreements.
- The second year: Investing in overhaul of facilities.
- Final phase: Being able to significantly ramp up output.
This suggests an rise of around half a million barrels per day perhaps by the end of the decade.
Desire Versus Readiness for Spending
There is a key distinction between firms' attention and their appetite to invest significantly.
“I think their attention is an eight, on a scale of one to 10. However, their readiness is a mid-range score, because there is a lack of certainty yet.”
Experienced diplomats in the sector share this caution. The thinking is that majors will politically talk up the opportunity while privately proceeding with deliberate slowness.
The Enormous Investment Required
The required bill would be vast. University analysis suggest that adding between half a million and a million barrels per day would require in excess of $10 billion in funding over several years.
However, restoring output to historical levels of around 2.5 million bpd could require a monumental $80 billion to $90 billion over many more years.
The Pending Question of Federal Guarantees
The idea of energy companies being reimbursed by the government has been often floated. Nevertheless, formal assurances on such a mechanism have so far not been provided.
The absence of clarity is the main factor behind the sector's hesitation. Companies seek safeguards against sovereign risk and the possibility that a different government could cancel any deal.
“You need to be insured against sovereign risk, that we’ve experienced in Venezuela before.”
In summary, while political confidence runs strong, the practical challenges suggest a path of extreme caution for potential major financial commitment in the country's energy industry.
