Industry experts have shown deep doubt regarding optimistic statements that American large firms will quickly pump tens of billions of dollars to rebuild the country's dilapidated energy sector.
Demand for Solid Assurances
Absent an absolute assurance of full reimbursement from the US federal government, experts believe international firms to proceed with great care.
“It would be premature to comment on any future business activities,” a spokesperson commented recently.
The optimistic timeframe of less than a year and a half has been publicly outlined. Nevertheless, realistic assessments paint a more cautious outlook.
A Likely Outlook
“Chances are going to take 36 months for any significant recovery in production,” said one industry expert.
The analysis indicates operators would likely spend:
- The first year: Sorting through new government and security contracts.
- The second year: Commencing rebuilding of equipment.
- The third year: Being able to meaningfully increase production.
The result could be an rise of around half a million barrels per day possibly by 2029.
Interest vs. Willingness for Investment
There is a critical difference between multinationals’ interest and their willingness to spend significantly.
“I believe their curiosity is an high score, on a scale of one to 10. However, their willingness is a mid-range score, because there is a lack of certainty yet.”
Seasoned diplomats in the sector share this sentiment. They believe that majors will politically talk up the opportunity while in practice proceeding with deliberate slowness.
The Vast Investment Required
The monetary outlay would be colossal. Independent estimates suggest that adding between half a million and a million barrels per day would require over $10 billion in investment over two to three years.
Yet, returning output to peak levels of around 2.5 million bpd could require a massive $80 billion to $90 billion over many more years.
The Unanswered Issue of Federal Guarantees
The idea of energy companies being reimbursed by the federal government has been repeatedly floated. But, specific plans on such a mechanism have not yet been provided.
This lack of clarity is the key reason behind the sector's caution. Operators seek protection against sovereign risk and the risk that a subsequent administration could renege on any deal.
“They must be protected from nationalization, that we’ve seen in Venezuela previously.”
Therefore, while political promises runs strong, the financial realities suggest a journey of slow deliberation for any significant investment in the country's oil sector.
