Market specialists have voiced significant caution regarding bullish claims that American large firms will rapidly commit vast sums of dollars to fix the country's crumbling production facilities.
Requirement of Solid Assurances
Without an absolute assurance of complete repayment from the US federal government, analysts expect international firms to act with great care.
“It is hasty to comment on any future business activities,” an official commented in response.
The aggressive timeline of less than a year and a half was publicly suggested. Nevertheless, industry projections indicate a longer timeline.
A Likely Timeline
“It’s probably going to take multiple years for any meaningful recovery in production,” commented an industry expert.
He suggested oil companies would likely spend:
- The first year: Sorting through new government and security contracts.
- The second year: Investing in reconstruction of infrastructure.
- The third year: Starting to significantly ramp up production.
This would lead to an increase of around half a million bpd perhaps by the end of the decade.
Desire Versus Readiness for Spending
Analysts draw a critical difference between companies' curiosity and their appetite to invest substantially.
“I think their attention is an eight, on a scale of ten. However, their readiness is a mid-range score, because there is significant uncertainty yet.”
Veteran diplomats in the region echo this view. They believe that majors will publicly call it fantastic while privately proceeding with great care.
The Colossal Cost
The financial outlay would be enormous. University analysis suggest that adding between 500,000 and a million bpd would require in excess of $10 billion in funding over several years.
However, returning production to peak levels of around 2.5 million bpd could require a monumental $80 billion to $90 billion over six or seven years.
The Pending Question of Government Backing
The suggestion of oil giants being reimbursed by the federal government has been often raised. But, concrete details on any guarantee have not yet been announced.
Without clarity is the primary impediment for the industry's caution. Operators seek safeguards against political risk and the risk that a different government could renege on any deal.
“You need to be shielded from nationalization, that we’ve witnessed in Venezuela previously.”
Ultimately, while political promises runs strong, the practical risks suggest a road of extreme caution for any major financial commitment in the country's energy industry.
