Market specialists have expressed significant doubt regarding optimistic claims that American energy majors will rapidly invest tens of billions of dollars to revive the country's crumbling energy sector.
Requirement of Solid Protections
Without an absolute assurance of full reimbursement from the Washington, specialists predict international firms to act with significant hesitation.
“It would be too early to comment on any future business activities,” an official commented this weekend.
The ambitious schedule of less than 18 months has been publicly proposed. However, industry projections paint a different picture.
A More Realistic Schedule
“It is likely going to take 36 months for any kind of output increase,” noted one chief investment officer.
The analysis indicates energy firms would likely spend:
- Year one: Sorting through new operating agreements.
- The second year: Investing in rebuilding of equipment.
- Final phase: Starting to boost production.
The result could be an rise of around 500,000 barrels per day maybe by the end of the decade.
Appetite Compared to Willingness for Investment
Experts make a important separation between multinationals’ interest and their willingness to spend substantially.
“I think their curiosity is an high score, on a scale of ten. However, their appetite is a much lower, because there is a lack of certainty yet.”
Veteran diplomats in the region reinforce this sentiment. The thinking is that companies will publicly talk up the opportunity while privately proceeding with deliberate slowness.
The Enormous Investment Required
The financial investment would be enormous. University projections suggest that adding between 500,000 and a million barrels per day would require more than $10 billion in funding over several years.
But, restoring production to historical levels of around 2.5 million bpd could require a monumental $80 billion to $90 billion over six or seven years.
The Outstanding Issue of Taxpayer Funding
The suggestion of firms being compensated by the federal government has been often floated. Nevertheless, formal assurances on this proposal have so far not been forthcoming.
This lack of clarity is the key reason for the sector's caution. Companies seek safeguards against political risk and the risk that a future administration could renege on any promise.
“It is essential to be insured against nationalization, that we’ve experienced in Venezuela already.”
Ultimately, while rhetorical promises runs strong, the operational realities suggest a road of measured steps for any major venture in the country's oil sector.
