Market specialists have shown deep caution regarding recent predictions that American energy majors will quickly invest tens of billions of dollars to rebuild the country's broken production facilities.
Requirement of Solid Assurances
Absent an solid promise of complete repayment from the US federal government, analysts expect international firms to act with extreme caution.
“It seems hasty to discuss any potential investments,” an official said in response.
The optimistic timeframe of less than a year and a half was publicly suggested. Nevertheless, realistic assessments paint a longer timeline.
A Likely Schedule
“It is likely going to take three years for any significant output increase,” said an chief investment officer.
He suggested oil companies would likely spend:
- The first year: Sorting through new government and security contracts.
- Year two: Beginning rebuilding of facilities.
- Year three: Being able to meaningfully increase output.
The result could be an boost of around half a million barrels per day perhaps by 2029.
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 high score, on a scale of ten. However, their willingness is a mid-range score, because there is a lack of certainty yet.”
Seasoned observers in the sector share this view. The thinking is that companies will publicly call it fantastic while privately acting with extreme caution.
The Vast Cost
The financial bill would be vast. Independent estimates suggest that adding between 500,000 and a million barrels per day would require in excess of $10 billion in investment over two to three years.
But, rebuilding output 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 Issue of Federal Guarantees
The prospect of energy companies being compensated by the federal government has been often mentioned. Nevertheless, formal assurances on such a mechanism have not yet been announced.
Without a solid plan is the key factor behind the industry's hesitation. Operators seek protection against nationalization and the chance that a future administration could cancel any deal.
“They must be protected from nationalization, that we’ve witnessed in Venezuela already.”
Therefore, while political promises runs high, the financial risks suggest a journey of measured steps for any large-scale venture in the country's oil sector.
