Industry experts have voiced deep skepticism regarding optimistic predictions that American energy majors will quickly pump tens of billions of dollars to revive the country's broken production facilities.
Requirement of Absolute Protections
Absent an “iron-clad guarantee” of full reimbursement from the Washington, analysts expect global energy giants to move with extreme caution.
“It is too early to comment on any potential investments,” a representative stated this weekend.
The optimistic timeline of under a year and a half has been boldly outlined. Nevertheless, realistic assessments indicate a longer timeline.
A Likely Timeline
“It is likely going to take multiple years for any meaningful output increase,” noted an chief investment officer.
He suggested operators would likely spend:
- Year one: Sorting through new government and security contracts.
- Following phase: Investing in rebuilding of equipment.
- Year three: Starting to meaningfully increase production.
This would lead to an increase of around 500,000 bpd perhaps by the end of the decade.
Interest vs. Readiness for Risk
Experts make a key distinction between companies' curiosity and their readiness to commit substantially.
“I believe their curiosity is an high score, on a scale of ten. However, their readiness is a much lower, because there is a lack of certainty yet.”
Experienced observers in the country echo this sentiment. The thinking is that majors will politically talk up the opportunity while actually proceeding with great care.
The Enormous Cost
The required bill would be colossal. Independent analysis suggest that increasing production by between half a million and a million barrels per day would require more than $10 billion in capital spending over several years.
But, restoring 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 Pending Question of Taxpayer Funding
The prospect of firms being compensated by the government has been repeatedly raised. But, concrete details on any guarantee have not yet been provided.
The absence of certainty is the primary reason behind the sector's reluctance. Firms seek guarantees against political risk and the possibility that a different administration could refuse any deal.
“You need to be protected from political change, that we’ve witnessed in Venezuela before.”
Therefore, while political optimism runs strong, the operational challenges suggest a journey of extreme caution for any significant investment in the country's energy industry.
