Industry experts have voiced considerable skepticism regarding bullish predictions that US energy majors will quickly pump billions of dollars to rebuild the country's broken production facilities.
The Need for Iron-Clad Guarantees
Absent an “iron-clad guarantee” of complete repayment from the American government, analysts expect multinational oil companies to move with great care.
“It seems too early to comment on any future business activities,” an official said in response.
The ambitious timeframe of less than 18 months was boldly proposed. However, realistic assessments paint a longer timeline.
A Likely Schedule
“Chances are going to take three years for any significant production bounce,” said one energy analyst.
The analysis indicates energy firms would likely spend:
- Year one: Navigating new regulatory frameworks.
- Year two: Beginning overhaul of infrastructure.
- Year three: Starting to significantly ramp up yield.
This would lead to an increase of around 500,000 barrels per day possibly by 2029.
Appetite Compared to Appetite for Risk
There is a key distinction between firms' attention and their appetite to invest significantly.
“I believe their interest is an high score, on a scale of ten. However, their readiness is a much lower, because there is no clarity yet.”
Experienced operators in the sector reinforce this caution. They believe that firms will politically talk up the opportunity while privately proceeding with extreme caution.
The Vast Cost
The monetary outlay would be enormous. University analysis suggest that increasing production by between 500,000 and a million barrels per day would require more than $10 billion in investment over several years.
However, returning output to peak levels of around 2.5 million barrels per day could require a staggering $80 billion to $90 billion over many more years.
The Pending Question of Government Backing
The prospect of oil giants being paid back by the government has been repeatedly raised. Nevertheless, formal assurances on such a mechanism have not yet been forthcoming.
Without certainty is the primary factor for the sector's hesitation. Operators seek safeguards against sovereign risk and the risk that a future administration could renege on any agreement.
“You need to be shielded from sovereign risk, that we’ve experienced in Venezuela previously.”
Therefore, while political optimism runs high, the financial risks suggest a journey of measured steps for any significant venture in the country's energy industry.
