Industry experts have voiced deep doubt regarding bullish claims that US large firms will swiftly commit billions of dollars to rebuild the country's crumbling oil infrastructure.
Requirement of Solid Protections
Without an solid promise of full reimbursement from the Washington, experts believe multinational oil companies to act with great care.
“It seems too early to discuss any future business activities,” a spokesperson stated in response.
The ambitious timeframe of less than a year and a half has been publicly proposed. However, industry projections suggest a longer timeline.
A Probable Timeline
“Chances are going to take 36 months for any meaningful output increase,” noted one energy analyst.
The analysis indicates operators would likely spend:
- Initial phase: Sorting through new regulatory frameworks.
- Following phase: Commencing reconstruction of facilities.
- Year three: Being able to meaningfully increase output.
This would lead to an increase of around half a million barrels per day perhaps by the end of the decade.
Desire Versus Willingness for Investment
Experts make a critical difference between multinationals’ interest and their readiness to commit significantly.
“I think their curiosity is an high score, on a range of one to 10. I think their willingness is a much lower, because there is significant uncertainty yet.”
Experienced diplomats in the country echo this view. The thinking is that majors will publicly talk up the opportunity while in practice acting with deliberate slowness.
The Vast Cost
The monetary bill would be colossal. Research analysis suggest that increasing production by between 500,000 and a million barrels per day would require over $10 billion in investment over several years.
Yet, restoring production to previous levels of around 2.5 million bpd could require a staggering $80 billion to $90 billion over many more years.
The Outstanding Question of Taxpayer Funding
The idea of oil giants being compensated by the US taxpayer has been repeatedly floated. However, concrete details on such a mechanism have so far not been forthcoming.
This lack of certainty is the main factor for the sector's hesitation. Companies seek guarantees against political risk and the risk that a different administration could refuse any deal.
“You need to be protected from sovereign risk, that we’ve witnessed in Venezuela before.”
Therefore, while rhetorical optimism runs high, the operational risks suggest a journey of slow deliberation for any major financial commitment in the country's energy industry.
