Energy analysts have voiced considerable skepticism regarding bullish claims that US energy majors will rapidly pump billions of dollars to fix the country's dilapidated oil infrastructure.
Requirement of Iron-Clad Protections
Lacking an “iron-clad guarantee” of financial backing from the American government, experts believe international firms to act with extreme caution.
“It is hasty to discuss any upcoming plans,” a representative said this weekend.
The ambitious schedule of under a year and a half was boldly proposed. However, realistic assessments indicate a different picture.
A Likely Timeline
“It’s probably going to take three years for any significant output increase,” noted an chief investment officer.
The analysis indicates operators would likely spend:
- The first year: Navigating new regulatory frameworks.
- Following phase: Investing in reconstruction of facilities.
- Final phase: Being able to boost output.
This would lead to an increase of around half a million barrels per day perhaps by 2029.
Appetite Compared to Willingness for Investment
Experts make a critical difference between firms' attention and their readiness to commit heavily.
“I believe their interest is an high score, on a scale of one to 10. But their appetite is a mid-range score, because there is no clarity yet.”
Veteran operators in the country share this view. The thinking is that majors will publicly talk up the opportunity while in practice moving with great care.
The Colossal Investment Required
The monetary investment would be colossal. Research estimates suggest that increasing production by between half a million and a million bpd would require over $10 billion in investment over several years.
However, returning production to peak levels of around 2.5 million barrels per day could require a massive $80 billion to $90 billion over six or seven years.
The Pending Question of Taxpayer Funding
The prospect of firms being paid back by the federal government has been repeatedly raised. But, formal assurances on such a mechanism have so far not been announced.
The absence of certainty is the main factor behind the industry's reluctance. Firms seek protection against sovereign risk and the risk that a future president could renege on any agreement.
“They must be shielded from political change, that we’ve seen in Venezuela before.”
In summary, while political promises runs strong, the practical challenges suggest a road of extreme caution for any large-scale investment in the country's oil sector.
