Market specialists have expressed significant skepticism regarding optimistic predictions that US oil giants will quickly commit billions of dollars to fix the country's crumbling production facilities.
The Need for Absolute Guarantees
Absent an absolute assurance of financial backing from the Washington, analysts expect international firms to act with extreme caution.
“It seems premature to discuss any future business activities,” an official said this weekend.
The aggressive schedule of less than a year and a half has been boldly outlined. Nevertheless, industry projections suggest a different picture.
A Probable Schedule
“It’s probably going to take three years for any meaningful production bounce,” commented one energy analyst.
The analysis indicates energy firms would likely spend:
- Year one: Sorting through new government and security contracts.
- The second year: Beginning rebuilding of facilities.
- Year three: Being able to boost production.
This suggests an boost of around 500,000 bpd possibly by the end of the decade.
Interest vs. Willingness for Risk
Analysts draw a critical difference between firms' attention and their willingness to spend heavily.
“I believe their attention is an high score, on a range of one to 10. I think their appetite is a mid-range score, because there is a lack of certainty yet.”
Experienced diplomats in the region share this sentiment. The thinking is that majors will politically express enthusiasm while privately proceeding with deliberate slowness.
The Vast Cost
The required outlay would be enormous. Research estimates suggest that adding between half a million and a million bpd would require over $10 billion in investment over several years.
However, restoring production 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 Pending Question of Federal Guarantees
The suggestion of firms being paid back by the government has been often floated. However, specific plans on this proposal have not yet been provided.
This lack of clarity is the key reason behind the sector's reluctance. Operators seek safeguards against sovereign risk and the risk that a different president could refuse any deal.
“It is essential to be shielded from political change, that we’ve seen in Venezuela before.”
Ultimately, while political optimism runs strong, the operational realities suggest a road of measured steps for any major venture in the country's energy industry.
