Market specialists have expressed deep skepticism regarding bullish predictions that US oil giants will quickly commit tens of billions of dollars to rebuild the country's broken oil infrastructure.
Requirement of Solid Protections
Absent an solid promise of complete repayment from the American government, specialists predict multinational oil companies to proceed with significant hesitation.
“It is premature to comment on any future business activities,” a representative stated in response.
The aggressive timeline of under a year and a half has been publicly proposed. Nevertheless, expert analyses indicate a longer timeline.
A More Realistic Schedule
“Chances are going to take multiple years for any kind of recovery in production,” noted an energy analyst.
He suggested oil companies would likely spend:
- Year one: Securing new operating agreements.
- The second year: Beginning reconstruction of facilities.
- Year three: Starting to significantly ramp up production.
This suggests an boost of around 500,000 bpd possibly by the end of the decade.
Appetite Compared to Readiness for Risk
Analysts draw a key distinction between multinationals’ interest and their appetite to invest heavily.
“In my view their attention is an high score, on a scale of one to 10. However, their readiness is a four or five, because there is a lack of certainty yet.”
Experienced diplomats in the country echo this view. The thinking is that majors will politically talk up the opportunity while privately acting with deliberate slowness.
The Vast Cost
The required outlay would be colossal. Research estimates suggest that adding between 500,000 and a million barrels per day would require more than $10 billion in capital spending over several years.
Yet, rebuilding production to peak levels of around 2.5 million barrels per day could require a massive $80 billion to $90 billion over many more years.
The Outstanding Question of Government Backing
The suggestion of oil giants being reimbursed by the government has been repeatedly floated. But, concrete details on such a mechanism have not yet been provided.
The absence of clarity is the main reason behind the sector's reluctance. Operators seek guarantees against sovereign risk and the possibility that a future administration could refuse any deal.
“It is essential to be protected from political change, that we’ve experienced in Venezuela already.”
Ultimately, while political promises runs high, the practical challenges suggest a road of extreme caution for any large-scale investment in the country's oil sector.
