Industry experts have shown significant caution regarding bullish predictions that American large firms will rapidly commit billions of dollars to fix the country's broken production facilities.
Requirement of Solid Guarantees
Lacking an “iron-clad guarantee” of financial backing from the American government, experts believe multinational oil companies to move with great care.
“It is premature to comment on any potential investments,” an official said recently.
The aggressive timeframe of under a year and a half has been publicly outlined. However, expert analyses paint a more cautious outlook.
A Likely Timeline
“Chances are going to take 36 months for any significant output increase,” noted an energy analyst.
He suggested energy firms would likely spend:
- Initial phase: Securing new government and security contracts.
- Year two: Investing in rebuilding of infrastructure.
- Year three: Starting to meaningfully increase yield.
This suggests an increase of around half a million bpd possibly by 2029.
Appetite Compared to Willingness for Risk
Analysts draw a important separation between multinationals’ interest and their appetite to invest heavily.
“I think their interest is an eight, on a scale of one to 10. But their readiness is a much lower, because there is significant uncertainty yet.”
Experienced operators in the country share this caution. The thinking is that firms will politically call it fantastic while actually proceeding with deliberate slowness.
The Enormous Cost
The financial investment would be colossal. Independent projections suggest that adding between 500,000 and a million barrels per day would require in excess of $10 billion in funding over two to three years.
However, rebuilding output to previous levels of around 2.5 million barrels per day could require a staggering $80 billion to $90 billion over six or seven years.
The Outstanding Question of Taxpayer Funding
The idea of firms being reimbursed by the government has been often floated. But, formal assurances on any guarantee have so far not been announced.
The absence of certainty is the key impediment behind the industry's caution. Firms seek safeguards against sovereign risk and the possibility that a future president could renege on any deal.
“They must be protected from nationalization, that we’ve experienced in Venezuela before.”
Ultimately, while rhetorical confidence runs strong, the operational realities suggest a road of slow deliberation for any major venture in the country's energy industry.
