Industry experts have shown deep doubt regarding recent predictions that US energy majors will quickly invest tens of billions of dollars to revive the country's dilapidated oil infrastructure.
The Need for Iron-Clad Guarantees
Absent an absolute assurance of financial backing from the Washington, analysts expect international firms to move with great care.
“It would be hasty to speculate on any upcoming plans,” a spokesperson said this weekend.
The optimistic timeframe of less than 18 months has been boldly outlined. Yet, realistic assessments suggest a different picture.
A More Realistic Outlook
“Chances are going to take multiple years for any kind of production bounce,” said an industry expert.
Experts believe energy firms would likely spend:
- Year one: Navigating new government and security contracts.
- The second year: Commencing reconstruction of equipment.
- Year three: Starting to meaningfully increase yield.
This would lead to an rise of around 500,000 barrels per day possibly by 2029.
Appetite Compared to Readiness for Spending
Experts make a key distinction between companies' curiosity and their appetite to invest heavily.
“I believe their attention is an high score, on a scale of one to 10. I think their willingness is a mid-range score, because there is significant uncertainty yet.”
Veteran operators in the sector reinforce this view. The thinking is that companies will politically call it fantastic while in practice acting with extreme caution.
The Vast Price Tag
The financial investment would be colossal. Independent projections suggest that increasing production by between half a million and a million barrels per day would require in excess of $10 billion in capital spending over several years.
But, rebuilding production to peak levels of around 2.5 million barrels per day could require a monumental $80 billion to $90 billion over six or seven years.
The Pending Question of Taxpayer Funding
The idea of firms being compensated by the US taxpayer has been repeatedly raised. But, concrete details on any guarantee have not yet been forthcoming.
This lack of a solid plan is the main impediment behind the sector's caution. Companies seek safeguards against sovereign risk and the risk that a subsequent administration could renege on any agreement.
“They must be shielded from sovereign risk, that we’ve witnessed in Venezuela already.”
Ultimately, while political confidence runs strong, the operational challenges suggest a journey of extreme caution for any major venture in the country's oil sector.
