Market specialists have expressed significant skepticism regarding optimistic predictions that US oil giants will quickly invest vast sums of dollars to fix the country's dilapidated oil infrastructure.
Requirement of Absolute Protections
Lacking an solid promise of full reimbursement from the Washington, analysts expect multinational oil companies to act with great care.
“It would be too early to speculate on any potential investments,” a spokesperson commented in response.
The ambitious timeline of less than 18 months was boldly proposed. Yet, expert analyses suggest a longer timeline.
A Probable Schedule
“It is likely going to take three years for any significant recovery in production,” said an energy analyst.
Experts believe operators would likely spend:
- The first year: Securing new operating agreements.
- Following phase: Beginning overhaul of facilities.
- Final phase: Starting to boost production.
The result could be an rise of around half a million bpd maybe by the end of the decade.
Interest vs. Willingness for Risk
There is a critical difference between firms' attention and their appetite to invest substantially.
“I believe their interest is an eight, on a range of ten. However, their appetite is a mid-range score, because there is no clarity yet.”
Veteran diplomats in the sector reinforce this sentiment. They believe that majors will publicly express enthusiasm while in practice moving with extreme caution.
The Enormous Cost
The required investment would be colossal. Independent projections suggest that adding between half a million and a million barrels per day would require more than $10 billion in investment over two to three years.
However, returning output to peak levels of around 2.5 million barrels per day could require a massive $80 billion to $90 billion over many more years.
The Unanswered Issue of Government Backing
The suggestion of oil giants being compensated by the US taxpayer has been repeatedly raised. Nevertheless, formal assurances on any guarantee have not yet been announced.
This lack of clarity is the primary factor for the sector's caution. Companies seek protection against political risk and the chance that a subsequent administration could cancel any deal.
“You need to be shielded from sovereign risk, that we’ve witnessed in Venezuela before.”
Therefore, while political optimism runs high, the practical risks suggest a path of extreme caution for potential significant financial commitment in the country's oil sector.
