Energy analysts have voiced significant doubt regarding recent claims that US energy majors will quickly pump billions of dollars to revive the country's dilapidated production facilities.
Requirement of Solid Assurances
Absent an absolute assurance of full reimbursement from the US federal government, analysts expect global energy giants to move with great care.
“It would be premature to speculate on any potential investments,” a spokesperson said in response.
The optimistic timeframe of under a year and a half was boldly proposed. Yet, expert analyses indicate a more cautious outlook.
A More Realistic Schedule
“Chances are going to take multiple years for any kind of output increase,” noted one chief investment officer.
The analysis indicates operators would likely spend:
- Year one: Navigating new operating agreements.
- Year two: Investing in overhaul of equipment.
- The third year: Starting to boost output.
The result could be an boost of around 500,000 bpd possibly by the end of the decade.
Appetite Compared to Willingness for Spending
Analysts draw a key distinction between firms' attention and their appetite to invest substantially.
“I think their attention is an high score, on a scale of one to 10. However, their appetite is a mid-range score, because there is significant uncertainty yet.”
Veteran diplomats in the sector echo this caution. The expectation is that firms will politically call it fantastic while actually acting with extreme caution.
The Vast Investment Required
The monetary outlay would be enormous. Independent analysis suggest that increasing production by between half a million and a million bpd would require more than $10 billion in investment over several years.
But, rebuilding production to previous levels of around 2.5 million barrels per day could require a monumental $80 billion to $90 billion over many more years.
The Outstanding Issue of Taxpayer Funding
The idea of oil giants being paid back by the federal government has been repeatedly floated. Nevertheless, specific plans on such a mechanism have not yet been forthcoming.
Without certainty is the main impediment for the industry's hesitation. Companies seek safeguards against sovereign risk and the risk that a future administration could cancel any deal.
“They must be insured against nationalization, that we’ve seen in Venezuela before.”
In summary, while political confidence runs strong, the practical challenges suggest a path of slow deliberation for any large-scale venture in the country's energy industry.
