Industry experts have voiced deep doubt regarding bullish claims that US large firms will swiftly invest tens of billions of dollars to revive the country's broken energy sector.
Requirement of Solid Assurances
Without an absolute assurance of financial backing from the US federal government, experts believe global energy giants to proceed with extreme caution.
“It seems too early to comment on any upcoming plans,” a representative commented recently.
The aggressive timeframe of less than 18 months has been boldly suggested. Nevertheless, expert analyses indicate a different picture.
A Probable Schedule
“Chances are going to take 36 months for any significant production bounce,” commented one industry expert.
Experts believe operators would likely spend:
- Year one: Securing new government and security contracts.
- Following phase: Commencing overhaul of infrastructure.
- Year three: Being able to boost production.
This suggests an rise of around 500,000 bpd possibly by the end of the decade.
Appetite Compared to Appetite for Spending
Experts make a key distinction between firms' attention and their readiness to commit significantly.
“I think their interest is an eight, on a range of ten. However, their willingness is a mid-range score, because there is no clarity yet.”
Veteran observers in the sector echo this view. The thinking is that companies will politically express enthusiasm while privately proceeding with extreme caution.
The Vast Price Tag
The required outlay would be enormous. University estimates suggest that adding between half a million and a million barrels per day would require in excess of $10 billion in funding over two to three years.
Yet, restoring production to previous levels of around 2.5 million bpd could require a monumental $80 billion to $90 billion over many more years.
The Unanswered Issue of Federal Guarantees
The prospect of energy companies being compensated by the federal government has been repeatedly raised. However, concrete details on this proposal have not yet been announced.
This lack of certainty is the key impediment behind the industry's caution. Companies seek guarantees against sovereign risk and the risk that a subsequent administration could refuse any agreement.
“They must be insured against nationalization, that we’ve witnessed in Venezuela before.”
Therefore, while rhetorical promises runs strong, the practical realities suggest a journey of extreme caution for any large-scale financial commitment in the country's oil sector.
