Industry experts have voiced considerable doubt regarding bullish statements that US oil giants will rapidly pump billions of dollars to rebuild the country's crumbling oil infrastructure.
Requirement of Absolute Guarantees
Without an absolute assurance of financial backing from the Washington, experts believe international firms to proceed with significant hesitation.
“It would be premature to speculate on any upcoming plans,” a spokesperson said this weekend.
The aggressive schedule of under 18 months has been boldly proposed. However, expert analyses indicate a longer timeline.
A Likely Schedule
“It is likely going to take multiple years for any significant production bounce,” said an industry expert.
He suggested oil companies would likely spend:
- The first year: Securing new government and security contracts.
- The second year: Beginning reconstruction of infrastructure.
- The third year: Being able to significantly ramp up yield.
The result could be an increase of around 500,000 bpd possibly by 2029.
Appetite Compared to Readiness for Risk
Analysts draw a critical difference between multinationals’ interest and their willingness to spend heavily.
“I think their curiosity is an high score, on a scale of ten. I think their willingness is a mid-range score, because there is a lack of certainty yet.”
Experienced operators in the country reinforce this view. They believe that companies will politically express enthusiasm while privately acting with great care.
The Colossal Investment Required
The required investment would be enormous. Independent projections suggest that adding between 500,000 and a million barrels per day would require over $10 billion in investment over several years.
But, rebuilding production to historical 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 Federal Guarantees
The suggestion of oil giants being reimbursed by the federal government has been often raised. But, formal assurances on any guarantee have so far not been announced.
Without certainty is the primary impediment behind the industry's caution. Operators seek safeguards against political risk and the possibility that a subsequent president could refuse any agreement.
“It is essential to be protected from nationalization, that we’ve seen in Venezuela already.”
In summary, while political optimism runs high, the operational realities suggest a road of measured steps for any large-scale investment in the country's oil sector.
