Industry experts have voiced deep doubt regarding bullish statements that US oil giants will quickly invest vast sums of dollars to revive the country's dilapidated production facilities.
Demand for Absolute Protections
Absent an “iron-clad guarantee” of complete repayment from the Washington, experts believe international firms to proceed with great care.
“It is hasty to speculate on any future business activities,” a representative said recently.
The optimistic timeline of less than 18 months has been publicly outlined. Nevertheless, realistic assessments indicate a longer timeline.
A Probable Timeline
“Chances are going to take multiple years for any meaningful recovery in production,” commented an industry expert.
He suggested energy firms would likely spend:
- Year one: Sorting through new regulatory frameworks.
- The second year: Investing in reconstruction of infrastructure.
- The third year: Reaching a position to meaningfully increase production.
This suggests an increase of around half a million barrels per day maybe by the end of the decade.
Appetite Compared to Willingness for Spending
Experts make a important separation between companies' curiosity and their appetite to invest significantly.
“I think their attention is an high score, on a range of one to 10. However, their willingness is a much lower, because there is no clarity yet.”
Seasoned observers in the country reinforce this view. The expectation is that majors will publicly talk up the opportunity while actually acting with deliberate slowness.
The Enormous Investment Required
The required investment would be colossal. University projections suggest that adding between 500,000 and a million bpd would require in excess of $10 billion in investment over two to three years.
Yet, rebuilding production to peak levels of around 2.5 million barrels per day could require a monumental $80 billion to $90 billion over many more years.
The Unanswered Question of Taxpayer Funding
The prospect of firms being compensated by the US taxpayer has been repeatedly floated. Nevertheless, concrete details on such a mechanism have not yet been forthcoming.
This lack of clarity is the main impediment for the industry's caution. Firms seek safeguards against nationalization and the chance that a different president could renege on any agreement.
“You need to be protected from political change, that we’ve witnessed in Venezuela previously.”
Ultimately, while political confidence runs high, the operational challenges suggest a path of slow deliberation for potential significant investment in the country's energy industry.
