Industry experts have voiced deep skepticism regarding recent statements that US energy majors will quickly invest vast sums of dollars to fix the country's dilapidated oil infrastructure.
Requirement of Iron-Clad Assurances
Without an solid promise of financial backing from the Washington, analysts expect global energy giants to move with great care.
“It seems hasty to comment on any upcoming plans,” a representative commented recently.
The aggressive timeframe of under a year and a half has been boldly outlined. However, industry projections suggest a more cautious outlook.
A Probable Timeline
“Chances are going to take three years for any kind of output increase,” said an energy analyst.
The analysis indicates energy firms would likely spend:
- The first year: Securing new regulatory frameworks.
- Following phase: Investing in overhaul of facilities.
- Year three: Starting to significantly ramp up output.
This suggests an increase of around 500,000 barrels per day possibly by 2029.
Appetite Compared to Willingness for Risk
Experts make a key distinction between companies' curiosity and their appetite to invest heavily.
“I believe their interest is an high score, on a range of ten. However, their willingness is a four or five, because there is no clarity yet.”
Veteran diplomats in the country share this view. They believe that companies will politically express enthusiasm while actually proceeding with deliberate slowness.
The Enormous Cost
The required bill would be enormous. University estimates suggest that adding between half a million and a million bpd would require over $10 billion in funding over two to three years.
However, returning production to peak levels of around 2.5 million bpd could require a staggering $80 billion to $90 billion over many more years.
The Pending Question of Government Backing
The suggestion of firms being compensated by the federal government has been repeatedly mentioned. But, specific plans on such a mechanism have not yet been provided.
The absence of clarity is the primary reason for the sector's caution. Firms seek protection against political risk and the possibility that a subsequent government could renege on any deal.
“They must be insured against sovereign risk, that we’ve seen in Venezuela already.”
Ultimately, while political confidence runs high, the financial risks suggest a road of measured steps for potential large-scale financial commitment in the country's energy industry.
