Market specialists have shown deep caution regarding recent claims that American energy majors will swiftly invest billions of dollars to fix the country's dilapidated oil infrastructure.
The Need for Solid Guarantees
Without an solid promise of financial backing from the Washington, experts believe multinational oil companies to proceed with significant hesitation.
“It seems hasty to comment on any upcoming plans,” a representative commented this weekend.
The optimistic schedule of less than 18 months was publicly proposed. Nevertheless, industry projections paint a different picture.
A Likely Outlook
“It’s probably going to take multiple years for any meaningful production bounce,” said one energy analyst.
Experts believe energy firms would likely spend:
- The first year: Sorting through new government and security contracts.
- Year two: Investing in reconstruction of equipment.
- Final phase: Being able to significantly ramp up production.
This would lead to an boost of around half a million barrels per day possibly by the end of the decade.
Desire Versus Appetite for Risk
Experts make a important separation between companies' curiosity and their readiness to commit significantly.
“In my view their curiosity is an eight, on a range of one to 10. However, their willingness is a much lower, because there is a lack of certainty yet.”
Veteran operators in the country share this view. The thinking is that majors will publicly call it fantastic while actually moving with extreme caution.
The Vast Investment Required
The required bill would be enormous. University analysis suggest that adding between half a million and a million barrels per day would require in excess of $10 billion in capital spending over several years.
But, rebuilding production to historical levels of around 2.5 million bpd could require a massive $80 billion to $90 billion over six or seven years.
The Outstanding Issue of Government Backing
The idea of energy companies being reimbursed by the government has been repeatedly floated. But, concrete details on such a mechanism have so far not been provided.
This lack of certainty is the main factor behind the industry's hesitation. Operators seek protection against nationalization and the chance that a future government could cancel any deal.
“They must be insured against sovereign risk, that we’ve seen in Venezuela before.”
Ultimately, while political confidence runs strong, the operational risks suggest a road of slow deliberation for any large-scale venture in the country's energy industry.
