Market specialists have shown considerable caution regarding recent claims that American energy majors will swiftly commit tens of billions of dollars to revive the country's broken energy sector.
Demand for Iron-Clad Assurances
Absent an absolute assurance of full reimbursement from the American government, analysts expect international firms to move with extreme caution.
“It would be hasty to comment on any upcoming plans,” an official commented in response.
The ambitious timeline of under a year and a half has been boldly suggested. However, expert analyses paint a longer timeline.
A Likely Outlook
“Chances are going to take three years for any kind of recovery in production,” commented one industry expert.
He suggested oil companies would likely spend:
- The first year: Securing new government and security contracts.
- Year two: Investing in rebuilding of infrastructure.
- Year three: Starting to boost production.
This suggests an increase of around 500,000 barrels per day perhaps by the end of the decade.
Appetite Compared to Readiness for Risk
Experts make a key distinction between companies' curiosity and their willingness to spend substantially.
“In my view their attention is an high score, on a scale of one to 10. But their willingness is a much lower, because there is a lack of certainty yet.”
Seasoned operators in the country reinforce this caution. The thinking is that majors will politically express enthusiasm while privately moving with extreme caution.
The Colossal Investment Required
The monetary bill would be enormous. Research analysis suggest that adding between 500,000 and a million barrels per day would require over $10 billion in capital spending over several years.
But, returning production to previous levels of around 2.5 million barrels per day could require a monumental $80 billion to $90 billion over many more years.
The Pending Issue of Government Backing
The suggestion of energy companies being compensated by the US taxpayer has been often mentioned. However, specific plans on such a mechanism have so far not been forthcoming.
Without certainty is the primary impediment behind the industry's reluctance. Firms seek guarantees against sovereign risk and the risk that a different president could renege on any promise.
“They must be insured against nationalization, that we’ve witnessed in Venezuela already.”
In summary, while political promises runs high, the financial risks suggest a road of measured steps for any major financial commitment in the country's oil sector.
