Industry experts have expressed deep caution regarding optimistic claims that American energy majors will rapidly pump vast sums of dollars to rebuild the country's crumbling energy sector.
The Need for Absolute Protections
Lacking an “iron-clad guarantee” of full reimbursement from the US federal government, specialists predict global energy giants to move with extreme caution.
“It seems too early to speculate on any future business activities,” a representative said in response.
The aggressive timeline of under a year and a half was boldly proposed. However, expert analyses indicate a more cautious outlook.
A Likely Schedule
“It’s probably going to take three years for any meaningful recovery in production,” commented an chief investment officer.
Experts believe oil companies would likely spend:
- Year one: Sorting through new operating agreements.
- Following phase: Beginning rebuilding of equipment.
- Final phase: Being able to boost output.
This would lead to an increase of around half a million barrels per day maybe by the end of the decade.
Interest vs. Willingness for Risk
Experts make a critical difference between multinationals’ interest and their willingness to spend significantly.
“I believe their curiosity is an eight, on a scale of one to 10. I think their readiness is a mid-range score, because there is a lack of certainty yet.”
Seasoned operators in the country echo this sentiment. The thinking is that companies will politically talk up the opportunity while in practice proceeding with great care.
The Colossal Price Tag
The financial outlay would be vast. Independent estimates suggest that adding between 500,000 and a million barrels per day would require over $10 billion in funding over two to three years.
However, restoring production to peak levels of around 2.5 million bpd could require a massive $80 billion to $90 billion over many more years.
The Unanswered Question of Federal Guarantees
The idea of oil giants being reimbursed by the federal government has been often floated. But, specific plans on any guarantee have not yet been forthcoming.
Without certainty is the main impediment for the industry's reluctance. Companies seek safeguards against sovereign risk and the risk that a future administration could cancel any agreement.
“They must be insured against political change, that we’ve witnessed in Venezuela before.”
Therefore, while rhetorical promises runs strong, the operational challenges suggest a road of measured steps for any major venture in the country's energy industry.
