Energy analysts have shown considerable doubt regarding recent predictions that US energy majors will quickly pump billions of dollars to revive the country's broken energy sector.
Demand for Absolute Protections
Absent an absolute assurance of full reimbursement from the US federal government, experts believe multinational oil companies to act with great care.
“It seems hasty to discuss any potential investments,” a representative stated in response.
The aggressive timeframe of under a year and a half has been publicly outlined. However, industry projections paint a different picture.
A Likely Timeline
“Chances are going to take 36 months for any kind of recovery in production,” said one energy analyst.
He suggested oil companies would likely spend:
- Initial phase: Securing new operating agreements.
- Following phase: Investing in overhaul of infrastructure.
- The third year: Being able to meaningfully increase output.
This would lead to an rise of around half a million bpd maybe by the end of the decade.
Interest vs. Willingness for Risk
There is a critical difference between firms' attention and their willingness to spend substantially.
“In my view their curiosity is an eight, on a scale of one to 10. I think their willingness is a four or five, because there is significant uncertainty yet.”
Veteran operators in the country share this view. The thinking is that companies will publicly express enthusiasm while actually moving with extreme caution.
The Vast Price Tag
The financial outlay would be colossal. University estimates suggest that adding between half a million and a million bpd would require in excess of $10 billion in capital spending over two to three years.
But, restoring production 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 Outstanding Issue of Federal Guarantees
The idea of energy companies being paid back by the US taxpayer has been repeatedly mentioned. But, formal assurances on this proposal have so far not been forthcoming.
Without clarity is the primary factor behind the sector's reluctance. Operators seek protection against nationalization and the risk that a subsequent president could cancel any promise.
“You need to be insured against sovereign risk, that we’ve witnessed in Venezuela before.”
Therefore, while political promises runs high, the practical challenges suggest a road of slow deliberation for any significant venture in the country's energy industry.
