Energy analysts have voiced significant skepticism regarding optimistic predictions that US energy majors will quickly pump tens of billions of dollars to rebuild the country's crumbling oil infrastructure.
Requirement of Solid Protections
Without an solid promise of full reimbursement from the Washington, analysts expect multinational oil companies to act with extreme caution.
“It would be hasty to discuss any upcoming plans,” a representative stated in response.
The ambitious timeline of less than 18 months has been publicly suggested. However, industry projections indicate a longer timeline.
A Probable Timeline
“It is likely going to take three years for any meaningful output increase,” noted an energy analyst.
The analysis indicates oil companies would likely spend:
- Initial phase: Securing new regulatory frameworks.
- Following phase: Investing in overhaul of equipment.
- Year three: Being able to boost output.
The result could be an rise of around half a million bpd possibly by 2029.
Appetite Compared to Readiness for Investment
Analysts draw a critical difference between firms' attention and their appetite to invest significantly.
“I think their attention is an eight, on a scale of one to 10. I think their willingness is a four or five, because there is a lack of certainty yet.”
Seasoned observers in the country share this view. They believe that companies will publicly express enthusiasm while privately moving with deliberate slowness.
The Enormous Price Tag
The monetary investment would be vast. Independent estimates suggest that adding between half a million and a million barrels per day would require more than $10 billion in capital spending over two to three years.
Yet, returning production to previous levels of around 2.5 million barrels per day could require a massive $80 billion to $90 billion over six or seven years.
The Outstanding Issue of Government Backing
The prospect of oil giants being reimbursed by the federal government has been often mentioned. But, specific plans on such a mechanism have so far not been provided.
Without a solid plan is the key factor behind the industry's hesitation. Operators seek guarantees against nationalization and the chance that a future president could renege on any agreement.
“It is essential to be shielded from political change, that we’ve seen in Venezuela already.”
Ultimately, while political promises runs high, the practical realities suggest a road of extreme caution for potential significant investment in the country's energy industry.
