Energy analysts have shown deep doubt regarding optimistic statements that US large firms will rapidly pump vast sums of dollars to fix the country's crumbling production facilities.
The Need for Iron-Clad Protections
Lacking an “iron-clad guarantee” of financial backing from the Washington, analysts expect international firms to act with extreme caution.
“It would be too early to discuss any upcoming plans,” an official said in response.
The aggressive timeline of less than 18 months was publicly outlined. Nevertheless, expert analyses indicate a longer timeline.
A Likely Schedule
“It is likely going to take 36 months for any meaningful output increase,” noted one chief investment officer.
Experts believe energy firms would likely spend:
- Initial phase: Sorting through new regulatory frameworks.
- Year two: Investing in rebuilding of infrastructure.
- Year three: Reaching a position to meaningfully increase production.
The result could be an increase of around 500,000 bpd maybe by the end of the decade.
Appetite Compared to Readiness for Investment
There is a key distinction between companies' curiosity and their appetite to invest heavily.
“In my view their curiosity is an eight, on a scale of one to 10. But their readiness is a four or five, because there is significant uncertainty yet.”
Experienced diplomats in the region reinforce this view. The thinking is that majors will publicly call it fantastic while in practice moving with great care.
The Enormous Price Tag
The required outlay would be enormous. University projections suggest that increasing production by between 500,000 and a million barrels per day would require more than $10 billion in capital spending over several years.
But, returning production to peak levels of around 2.5 million barrels per day could require a monumental $80 billion to $90 billion over six or seven years.
The Unanswered Question of Taxpayer Funding
The prospect of energy companies being reimbursed by the US taxpayer has been often mentioned. But, concrete details on such a mechanism have so far not been forthcoming.
The absence of a solid plan is the main factor behind the industry's hesitation. Firms seek guarantees against nationalization and the risk that a different president could cancel any deal.
“You need to be insured against nationalization, that we’ve experienced in Venezuela already.”
In summary, while political confidence runs strong, the financial realities suggest a road of measured steps for any large-scale venture in the country's oil sector.
