Energy analysts have voiced significant doubt regarding bullish statements that American energy majors will rapidly invest tens of billions of dollars to fix the country's dilapidated energy sector.
Requirement of Absolute Protections
Without an solid promise of financial backing from the American government, experts believe global energy giants to proceed with extreme caution.
“It seems too early to comment on any potential investments,” an official said this weekend.
The ambitious timeframe of less than a year and a half was publicly outlined. However, industry projections indicate a longer timeline.
A More Realistic Outlook
“It is likely going to take three years for any significant production bounce,” said one chief investment officer.
The analysis indicates oil companies would likely spend:
- The first year: Sorting through new government and security contracts.
- Year two: Commencing reconstruction of equipment.
- Final phase: Starting to significantly ramp up yield.
This suggests an boost of around half a million barrels per day maybe by the end of the decade.
Interest vs. Appetite for Risk
Analysts draw a key distinction between multinationals’ interest and their readiness to commit substantially.
“I believe their attention is an eight, on a scale of ten. However, their willingness is a much lower, because there is significant uncertainty yet.”
Veteran observers in the country share this sentiment. The thinking is that companies will politically express enthusiasm while actually acting with great care.
The Enormous Price Tag
The monetary investment would be vast. Research 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.
Yet, restoring production to peak levels of around 2.5 million barrels per day could require a staggering $80 billion to $90 billion over six or seven years.
The Outstanding Question of Government Backing
The prospect of oil giants being reimbursed by the government has been often raised. But, specific plans on any guarantee have not yet been announced.
The absence of a solid plan is the main factor behind the industry's reluctance. Companies seek protection against political risk and the risk that a different administration could renege on any deal.
“They must be protected from political change, that we’ve seen in Venezuela before.”
Ultimately, while political promises runs high, the operational realities suggest a road of extreme caution for potential major investment in the country's energy industry.
