Industry experts have voiced deep skepticism regarding optimistic statements that US oil giants will rapidly pump tens of billions of dollars to rebuild the country's broken oil infrastructure.
Demand for Iron-Clad Guarantees
Without an “iron-clad guarantee” of full reimbursement from the Washington, specialists predict international firms to proceed with extreme caution.
“It would be too early to speculate on any future business activities,” an official said in response.
The ambitious schedule of less than a year and a half was publicly proposed. Nevertheless, industry projections indicate a different picture.
A Likely Outlook
“It is likely going to take three years for any meaningful output increase,” commented one industry expert.
Experts believe operators would likely spend:
- Initial phase: Sorting through new operating agreements.
- Following phase: Investing in reconstruction of facilities.
- The third year: Starting to boost yield.
The result could be an rise of around 500,000 bpd possibly by 2029.
Appetite Compared to Appetite for Risk
Experts make a important separation between companies' curiosity and their readiness to commit substantially.
“In my view their curiosity is an high score, on a scale of ten. But their appetite is a mid-range score, because there is significant uncertainty yet.”
Experienced operators in the region reinforce this view. The expectation is that companies will politically talk up the opportunity while in practice acting with extreme caution.
The Colossal Cost
The monetary outlay would be colossal. University estimates suggest that adding between 500,000 and a million bpd would require more than $10 billion in funding over two to three years.
But, rebuilding output to peak levels of around 2.5 million bpd could require a staggering $80 billion to $90 billion over many more years.
The Unanswered Issue of Government Backing
The suggestion of firms being paid back by the federal government has been often floated. Nevertheless, formal assurances on any guarantee have so far not been forthcoming.
The absence of a solid plan is the main reason for the industry's caution. Companies seek protection against political risk and the risk that a different administration could refuse any promise.
“It is essential to be insured against sovereign risk, that we’ve seen in Venezuela before.”
Ultimately, while rhetorical promises runs high, the practical risks suggest a road of extreme caution for potential significant financial commitment in the country's energy industry.
