Industry experts have expressed significant doubt regarding recent statements that US energy majors will swiftly commit tens of billions of dollars to rebuild the country's dilapidated production facilities.
Requirement of Solid Protections
Without an absolute assurance of full reimbursement from the Washington, experts believe multinational oil companies to move with significant hesitation.
“It seems premature to speculate on any potential investments,” an official stated this weekend.
The aggressive timeline of less than a year and a half has been publicly suggested. However, realistic assessments indicate a longer timeline.
A More Realistic Timeline
“Chances are going to take multiple years for any kind of output increase,” commented one industry expert.
Experts believe oil companies would likely spend:
- The first year: Sorting through new regulatory frameworks.
- Year two: Commencing overhaul of equipment.
- The third year: Reaching a position to boost yield.
This would lead to an boost of around half a million barrels per day perhaps by the end of the decade.
Interest vs. Readiness for Spending
There is a important separation between firms' attention and their willingness to spend significantly.
“I think their curiosity is an high score, on a scale of ten. But their appetite is a four or five, because there is a lack of certainty yet.”
Veteran observers in the region reinforce this view. The thinking is that companies will politically express enthusiasm while in practice moving with deliberate slowness.
The Colossal Price Tag
The financial outlay would be colossal. Independent analysis suggest that adding between 500,000 and a million barrels per day would require over $10 billion in capital spending over several years.
However, rebuilding output 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 Outstanding Issue of Taxpayer Funding
The prospect of energy companies being reimbursed by the US taxpayer has been repeatedly floated. Nevertheless, concrete details on this proposal have so far not been provided.
Without certainty is the key factor for the sector's caution. Companies seek guarantees against nationalization and the risk that a subsequent president could cancel any deal.
“It is essential to be insured against nationalization, that we’ve seen in Venezuela before.”
Therefore, while political promises runs strong, the operational realities suggest a road of slow deliberation for potential significant venture in the country's oil sector.
