Market specialists have shown deep doubt regarding recent claims that US oil giants will rapidly pump billions of dollars to rebuild the country's dilapidated production facilities.
Requirement of Absolute Assurances
Lacking an solid promise of financial backing from the US federal government, analysts expect multinational oil companies to act with extreme caution.
“It is hasty to discuss any future business activities,” an official stated recently.
The aggressive schedule of under 18 months was boldly outlined. However, expert analyses indicate a different picture.
A Likely Outlook
“It is likely going to take multiple years for any meaningful output increase,” noted an energy analyst.
He suggested energy firms would likely spend:
- Initial phase: Sorting through new government and security contracts.
- Year two: Commencing reconstruction of equipment.
- Year three: Starting to boost output.
The result could be an rise of around 500,000 barrels per day perhaps by the end of the decade.
Desire Versus Willingness for Investment
There is a critical difference between firms' attention and their willingness to spend heavily.
“In my view their interest is an high score, on a range of one to 10. But their appetite is a much lower, because there is a lack of certainty yet.”
Experienced operators in the sector reinforce this sentiment. The expectation is that majors will publicly talk up the opportunity while in practice moving with extreme caution.
The Enormous Price Tag
The required bill would be enormous. Independent analysis suggest that adding between 500,000 and a million barrels per day would require over $10 billion in investment over several years.
But, restoring production to previous levels of around 2.5 million barrels per day could require a staggering $80 billion to $90 billion over many more years.
The Outstanding Question of Taxpayer Funding
The prospect of oil giants being paid back by the US taxpayer has been repeatedly mentioned. But, concrete details on this proposal have so far not been provided.
The absence of clarity is the key reason behind the sector's reluctance. Firms seek protection against political risk and the possibility that a future president could cancel any deal.
“It is essential to be protected from political change, that we’ve experienced in Venezuela before.”
In summary, while rhetorical promises runs high, the practical realities suggest a journey of extreme caution for any significant financial commitment in the country's oil sector.
