Industry experts have expressed deep skepticism regarding optimistic predictions that American large firms will rapidly pump vast sums of dollars to rebuild the country's broken oil infrastructure.
Demand for Absolute Assurances
Absent an absolute assurance of financial backing from the US federal government, experts believe multinational oil companies to act with extreme caution.
“It would be hasty to comment on any upcoming plans,” an official said in response.
The optimistic timeframe of under 18 months has been boldly suggested. Nevertheless, realistic assessments suggest a different picture.
A Likely Schedule
“Chances are going to take 36 months for any kind of output increase,” said an energy analyst.
He suggested oil companies would likely spend:
- Year one: Navigating new government and security contracts.
- Following phase: Commencing overhaul of equipment.
- Final phase: Being able to meaningfully increase production.
This would lead to an rise of around 500,000 bpd possibly by the end of the decade.
Appetite Compared to Willingness for Spending
Experts make a important separation between companies' curiosity and their readiness to commit heavily.
“I think their interest is an high score, on a scale of ten. But their readiness is a mid-range score, because there is a lack of certainty yet.”
Seasoned observers in the region echo this sentiment. The expectation is that majors will politically call it fantastic while in practice acting with extreme caution.
The Vast Cost
The monetary bill would be vast. Independent estimates 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.
Yet, restoring output to previous 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 Question of Government Backing
The prospect of firms being paid back by the US taxpayer has been often raised. Nevertheless, specific plans on any guarantee have so far not been provided.
This lack of a solid plan is the key impediment for the industry's caution. Companies seek protection against nationalization and the risk that a different government could renege on any deal.
“You need to be insured against sovereign risk, that we’ve experienced in Venezuela before.”
In summary, while political confidence runs strong, the financial risks suggest a path of measured steps for any large-scale venture in the country's oil sector.
