Industry experts have voiced significant caution regarding optimistic claims that American energy majors will swiftly pump vast sums of dollars to revive the country's crumbling energy sector.
Requirement of Absolute Assurances
Absent an absolute assurance of full reimbursement from the Washington, analysts expect international firms to move with significant hesitation.
“It would be too early to discuss any future business activities,” an official said in response.
The ambitious timeframe of under 18 months has been boldly suggested. Nevertheless, expert analyses paint a longer timeline.
A Likely Timeline
“It is likely going to take three years for any significant recovery in production,” said one energy analyst.
The analysis indicates operators would likely spend:
- Initial phase: Securing new government and security contracts.
- The second year: Commencing overhaul of equipment.
- The third year: Reaching a position to boost output.
The result could be an rise of around half a million barrels per day possibly by 2029.
Appetite Compared to Readiness for Risk
Analysts draw a key distinction between firms' attention and their readiness to commit significantly.
“I believe their interest is an eight, on a range of one to 10. I think their willingness is a much lower, because there is significant uncertainty yet.”
Veteran observers in the region share this caution. The thinking is that majors will publicly express enthusiasm while in practice acting with extreme caution.
The Colossal Investment Required
The monetary outlay would be colossal. Independent projections suggest that adding between 500,000 and a million bpd would require more than $10 billion in investment over several years.
However, rebuilding output to previous levels of around 2.5 million bpd could require a massive $80 billion to $90 billion over six or seven years.
The Unanswered Issue of Taxpayer Funding
The suggestion of energy companies being compensated by the US taxpayer has been often floated. But, formal assurances on such a mechanism have so far not been forthcoming.
Without certainty is the main factor for the industry's reluctance. Companies seek safeguards against nationalization and the possibility that a future president could renege on any deal.
“It is essential to be protected from sovereign risk, that we’ve witnessed in Venezuela before.”
Therefore, while political promises runs high, the operational risks suggest a journey of extreme caution for any large-scale venture in the country's energy industry.
