Energy analysts have voiced deep doubt regarding recent statements that US large firms will quickly commit vast sums of dollars to rebuild the country's dilapidated oil infrastructure.
Demand for Iron-Clad Guarantees
Absent an “iron-clad guarantee” of complete repayment from the US federal government, analysts expect international firms to proceed with great care.
“It seems hasty to discuss any upcoming plans,” an official said in response.
The optimistic schedule of less than a year and a half was publicly suggested. However, realistic assessments indicate a more cautious outlook.
A Likely Outlook
“Chances are going to take multiple years for any meaningful output increase,” said an energy analyst.
He suggested oil companies would likely spend:
- The first year: Navigating new government and security contracts.
- Following phase: Commencing overhaul of facilities.
- The third year: Reaching a position to meaningfully increase production.
This suggests an increase of around half a million bpd maybe by 2029.
Interest vs. Willingness for Spending
There is a critical difference between firms' attention and their willingness to spend substantially.
“In my view their curiosity is an high score, on a scale of one to 10. But their appetite is a much lower, because there is no clarity yet.”
Veteran operators in the region echo this view. The thinking is that companies will politically express enthusiasm while in practice proceeding with great care.
The Vast Cost
The financial bill would be enormous. Research estimates suggest that adding between half a million and a million barrels per day would require over $10 billion in funding over several years.
However, returning production to historical levels of around 2.5 million barrels per day could require a monumental $80 billion to $90 billion over six or seven years.
The Pending Issue of Taxpayer Funding
The prospect of oil giants being paid back by the federal government has been often floated. But, formal assurances on any guarantee have not yet been forthcoming.
Without certainty is the main reason behind the sector's caution. Companies seek guarantees against sovereign risk and the possibility that a future government could refuse any deal.
“They must be protected from political change, that we’ve experienced in Venezuela before.”
In summary, while political promises runs high, the operational challenges suggest a path of measured steps for any significant venture in the country's oil sector.
