Energy analysts have shown considerable skepticism regarding optimistic statements that American energy majors will swiftly pump tens of billions of dollars to revive the country's crumbling oil infrastructure.
Demand for Absolute Protections
Without an “iron-clad guarantee” of financial backing from the American government, experts believe global energy giants to act with extreme caution.
“It would be too early to speculate on any potential investments,” a representative stated in response.
The aggressive schedule of less than 18 months was publicly suggested. Nevertheless, expert analyses suggest a longer timeline.
A Likely Timeline
“It’s probably going to take three years for any meaningful output increase,” noted one chief investment officer.
The analysis indicates operators would likely spend:
- The first year: Sorting through new operating agreements.
- The second year: Investing in reconstruction of equipment.
- The third year: Reaching a position to boost production.
This suggests an increase of around 500,000 barrels per day possibly by the end of the decade.
Desire Versus Readiness for Spending
Analysts draw a key distinction between firms' attention and their willingness to spend substantially.
“I think their attention is an high score, on a range of one to 10. I think their willingness is a four or five, because there is significant uncertainty yet.”
Experienced operators in the sector share this sentiment. The expectation is that firms will politically talk up the opportunity while actually acting with extreme caution.
The Enormous Cost
The required investment would be colossal. University estimates suggest that adding between half a million and a million bpd would require in excess of $10 billion in investment over two to three years.
Yet, rebuilding 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 Question of Federal Guarantees
The suggestion of energy companies being paid back by the US taxpayer has been repeatedly raised. However, concrete details on any guarantee have so far not been announced.
The absence of a solid plan is the key reason for the sector's caution. Firms seek guarantees against political risk and the risk that a future president could renege on any deal.
“It is essential to be shielded from sovereign risk, that we’ve seen in Venezuela before.”
Therefore, while political promises runs high, the financial realities suggest a road of measured steps for any large-scale venture in the country's oil sector.
