Industry experts have shown significant skepticism regarding recent statements that US energy majors will rapidly commit billions of dollars to revive the country's broken oil infrastructure.
Requirement of Solid Assurances
Absent an “iron-clad guarantee” of full reimbursement from the Washington, experts believe international firms to move with extreme caution.
“It seems too early to discuss any future business activities,” a representative stated in response.
The aggressive timeline of less than 18 months has been boldly suggested. However, expert analyses paint a more cautious outlook.
A Probable Schedule
“It’s probably going to take three years for any significant recovery in production,” said one industry expert.
He suggested energy firms would likely spend:
- Year one: Securing new operating agreements.
- Year two: Investing in overhaul of infrastructure.
- Year three: Being able to meaningfully increase yield.
This would lead to an increase of around half a million barrels per day possibly by the end of the decade.
Desire Versus Willingness for Risk
There is a important separation between multinationals’ interest and their readiness to commit significantly.
“I think their curiosity is an eight, on a scale of ten. However, their willingness is a much lower, because there is significant uncertainty yet.”
Experienced operators in the sector echo this sentiment. The expectation is that firms will publicly talk up the opportunity while actually acting with extreme caution.
The Vast Price Tag
The required investment would be enormous. University analysis suggest that adding between half a million and a million bpd would require over $10 billion in investment over several years.
But, returning production to historical levels of around 2.5 million bpd could require a massive $80 billion to $90 billion over six or seven years.
The Pending Issue of Federal Guarantees
The idea of firms being reimbursed by the government has been repeatedly floated. However, formal assurances on any guarantee have so far not been announced.
The absence of a solid plan is the main factor for the sector's hesitation. Firms seek protection against political risk and the chance that a future government could refuse any deal.
“You need to be protected from political change, that we’ve witnessed in Venezuela already.”
In summary, while political promises runs high, the operational challenges suggest a journey of extreme caution for potential significant venture in the country's oil sector.
