Energy analysts have shown significant caution regarding bullish predictions that US energy majors will quickly commit vast sums of dollars to fix the country's broken energy sector.
Requirement of Absolute Assurances
Without an solid promise of complete repayment from the Washington, specialists predict international firms to act with significant hesitation.
“It would be premature to comment on any upcoming plans,” an official stated in response.
The ambitious timeline of less than 18 months was boldly proposed. However, expert analyses indicate a longer timeline.
A Probable Schedule
“Chances are going to take multiple years for any meaningful recovery in production,” noted one chief investment officer.
The analysis indicates oil companies would likely spend:
- The first year: Securing new government and security contracts.
- The second year: Commencing rebuilding of infrastructure.
- Final phase: Starting to boost output.
The result could be an boost of around half a million barrels per day perhaps by the end of the decade.
Appetite Compared to Readiness for Investment
Analysts draw a critical difference between firms' attention and their appetite to invest significantly.
“I think their attention is an eight, on a range of ten. However, their readiness is a much lower, because there is no clarity yet.”
Seasoned operators in the region echo this sentiment. The expectation is that firms will politically express enthusiasm while privately proceeding with extreme caution.
The Vast Cost
The required investment would be enormous. Independent projections suggest that increasing production by between half a million and a million bpd would require more than $10 billion in capital spending over several years.
However, rebuilding production to previous levels of around 2.5 million barrels per day could require a monumental $80 billion to $90 billion over six or seven years.
The Outstanding Question of Government Backing
The suggestion of energy companies being reimbursed by the government has been repeatedly floated. But, formal assurances on this proposal have so far not been provided.
This lack of clarity is the key reason for the sector's hesitation. Operators seek safeguards against nationalization and the risk that a future administration could cancel any deal.
“It is essential to be protected from sovereign risk, that we’ve witnessed in Venezuela previously.”
In summary, while rhetorical promises runs strong, the practical risks suggest a road of slow deliberation for potential major venture in the country's oil sector.
