Energy analysts have shown significant caution regarding recent claims that US oil giants will rapidly invest vast sums of dollars to rebuild the country's broken energy sector.
Demand for Solid Guarantees
Absent an solid promise of financial backing from the American government, experts believe international firms to move with extreme caution.
“It seems hasty to comment on any potential investments,” a representative commented this weekend.
The optimistic schedule of less than 18 months has been publicly proposed. Nevertheless, industry projections suggest a different picture.
A Likely Schedule
“Chances are going to take multiple years for any significant recovery in production,” commented one energy analyst.
The analysis indicates oil companies would likely spend:
- Year one: Sorting through new government and security contracts.
- Following phase: Commencing reconstruction of equipment.
- Year three: Reaching a position to significantly ramp up production.
The result could be an increase of around half a million barrels per day possibly by 2029.
Desire Versus Appetite for Risk
There is a critical difference between multinationals’ interest and their willingness to spend significantly.
“I think their interest is an eight, on a range of one to 10. But their willingness is a mid-range score, because there is significant uncertainty yet.”
Veteran diplomats in the sector share this sentiment. The thinking is that majors will publicly talk up the opportunity while privately moving with great care.
The Colossal Price Tag
The financial outlay would be colossal. Independent estimates suggest that adding between 500,000 and a million bpd would require in excess of $10 billion in investment over several years.
Yet, restoring production to previous levels of around 2.5 million barrels per day could require a staggering $80 billion to $90 billion over many more years.
The Outstanding Question of Taxpayer Funding
The idea of firms being compensated by the government has been repeatedly floated. But, specific plans on this proposal have not yet been announced.
Without a solid plan is the main reason for the sector's reluctance. Firms seek protection against political risk and the chance that a subsequent president could refuse any deal.
“They must be protected from sovereign risk, that we’ve experienced in Venezuela previously.”
Therefore, while political promises runs strong, the operational realities suggest a path of measured steps for potential large-scale investment in the country's energy industry.
