Energy analysts have voiced significant skepticism regarding bullish statements that US energy majors will quickly pump vast sums of dollars to rebuild the country's broken production facilities.
Demand for Iron-Clad Protections
Lacking an solid promise of financial backing from the Washington, specialists predict global energy giants to act with extreme caution.
“It would be too early to discuss any future business activities,” an official said recently.
The ambitious timeframe of less than 18 months has been publicly suggested. However, realistic assessments indicate a different picture.
A Likely Timeline
“Chances are going to take 36 months for any significant production bounce,” noted one chief investment officer.
Experts believe operators would likely spend:
- The first year: Sorting through new government and security contracts.
- The second year: Investing in overhaul of infrastructure.
- Year three: Being able to significantly ramp up production.
The result could be an increase of around half a million barrels per day perhaps by 2029.
Appetite Compared to Willingness for Spending
Analysts draw a critical difference between companies' curiosity and their appetite to invest substantially.
“I believe their attention is an high score, on a range of one to 10. However, their appetite is a four or five, because there is significant uncertainty yet.”
Seasoned operators in the country echo this caution. They believe that majors will publicly talk up the opportunity while privately moving with great care.
The Enormous Investment Required
The financial bill would be vast. Research estimates suggest that adding between 500,000 and a million bpd would require in excess of $10 billion in investment over two to three years.
Yet, returning production to previous levels of around 2.5 million bpd could require a staggering $80 billion to $90 billion over many more years.
The Pending Issue of Federal Guarantees
The prospect of energy companies being reimbursed by the US taxpayer has been often raised. However, concrete details on any guarantee have so far not been announced.
This lack of certainty is the primary impediment behind the sector's reluctance. Operators seek safeguards against sovereign risk and the chance that a different president could renege on any promise.
“It is essential to be insured against political change, that we’ve witnessed in Venezuela before.”
Therefore, while rhetorical optimism runs high, the practical risks suggest a path of extreme caution for potential significant venture in the country's oil sector.
