Industry experts have shown significant caution regarding recent predictions that US oil giants will rapidly invest tens of billions of dollars to fix the country's crumbling energy sector.
The Need for Iron-Clad Assurances
Absent an absolute assurance of financial backing from the Washington, experts believe multinational oil companies to proceed with significant hesitation.
“It would be too early to speculate on any potential investments,” an official commented recently.
The ambitious timeframe of less than 18 months has been publicly proposed. Yet, expert analyses paint a longer timeline.
A Likely Timeline
“It is likely going to take 36 months for any meaningful recovery in production,” said one chief investment officer.
Experts believe operators would likely spend:
- Initial phase: Sorting through new operating agreements.
- Following phase: Beginning reconstruction of facilities.
- Final phase: Starting to meaningfully increase yield.
The result could be an increase of around half a million barrels per day perhaps by the end of the decade.
Appetite Compared to Readiness for Investment
Experts make a critical difference between companies' curiosity and their willingness to spend substantially.
“I believe their curiosity is an eight, on a scale of ten. I think their willingness is a mid-range score, because there is a lack of certainty yet.”
Seasoned diplomats in the country reinforce this caution. They believe that majors will publicly talk up the opportunity while actually moving with extreme caution.
The Vast Investment Required
The monetary investment would be enormous. University analysis suggest that increasing production by between half a million and a million barrels per day would require more than $10 billion in investment over two to three years.
However, restoring production to previous levels of around 2.5 million barrels per day could require a staggering $80 billion to $90 billion over many more years.
The Pending Issue of Government Backing
The prospect of oil giants being paid back by the government has been repeatedly floated. But, concrete details on such a mechanism have not yet been forthcoming.
The absence of a solid plan is the primary reason behind the industry's reluctance. Companies seek protection against sovereign risk and the risk that a subsequent administration could cancel any agreement.
“You need to be protected from sovereign risk, that we’ve witnessed in Venezuela previously.”
In summary, while political promises runs high, the financial realities suggest a journey of slow deliberation for potential major venture in the country's oil sector.
