Energy analysts have voiced deep caution regarding recent predictions that US oil giants will quickly invest billions of dollars to revive the country's crumbling energy sector.
The Need for Iron-Clad Protections
Without an “iron-clad guarantee” of financial backing from the US federal government, analysts expect global energy giants to act with significant hesitation.
“It is too early to discuss any future business activities,” a spokesperson stated in response.
The ambitious timeframe of under 18 months has been publicly suggested. However, industry projections suggest a different picture.
A Likely Outlook
“It is likely going to take 36 months for any significant output increase,” noted one chief investment officer.
Experts believe operators would likely spend:
- Year one: Securing new government and security contracts.
- Following phase: Beginning reconstruction of infrastructure.
- Final phase: Being able to boost production.
This suggests an increase of around half a million bpd possibly by the end of the decade.
Appetite Compared to Readiness for Spending
Experts make a critical difference between companies' curiosity and their readiness to commit heavily.
“In my view their interest is an eight, on a range of one to 10. I think their willingness is a four or five, because there is a lack of certainty yet.”
Experienced operators in the sector echo this view. The expectation is that majors will publicly express enthusiasm while actually proceeding with deliberate slowness.
The Vast Price Tag
The financial outlay would be colossal. Research estimates suggest that increasing production by between half a million and a million bpd would require over $10 billion in investment over several years.
However, 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 Outstanding Question of Government Backing
The idea of energy companies being paid back by the US taxpayer has been often raised. But, specific plans on such a mechanism have not yet been announced.
Without clarity is the key factor for the industry's caution. Companies seek safeguards against sovereign risk and the risk that a subsequent government could refuse any promise.
“It is essential to be shielded from political change, that we’ve experienced in Venezuela already.”
In summary, while rhetorical promises runs high, the financial risks suggest a road of slow deliberation for any significant venture in the country's oil sector.
