Energy analysts have voiced deep caution regarding bullish statements that US energy majors will quickly pump billions of dollars to rebuild the country's crumbling energy sector.
The Need for Solid Guarantees
Absent an solid promise of full reimbursement from the Washington, analysts expect global energy giants to proceed with extreme caution.
“It is premature to discuss any upcoming plans,” a representative said in response.
The aggressive timeline of less than 18 months has been boldly suggested. Yet, realistic assessments indicate a different picture.
A Likely Schedule
“It is likely going to take three years for any kind of recovery in production,” commented an energy analyst.
The analysis indicates oil companies would likely spend:
- The first year: Securing new government and security contracts.
- The second year: Beginning overhaul of equipment.
- Year three: Starting to meaningfully increase yield.
This would lead to an rise of around 500,000 barrels per day perhaps by 2029.
Appetite Compared to Readiness for Risk
Experts make a key distinction between multinationals’ interest and their willingness to spend heavily.
“I believe their interest is an eight, on a range of one to 10. But their readiness is a mid-range score, because there is a lack of certainty yet.”
Veteran observers in the sector share this sentiment. The expectation is that majors will politically express enthusiasm while in practice moving with deliberate slowness.
The Colossal Price Tag
The required investment would be colossal. Research estimates suggest that adding between 500,000 and a million bpd would require over $10 billion in investment over two to three years.
Yet, restoring production to previous levels of around 2.5 million bpd could require a massive $80 billion to $90 billion over six or seven years.
The Pending Issue of Government Backing
The suggestion of energy companies being compensated by the US taxpayer has been often floated. But, formal assurances on this proposal have so far not been forthcoming.
The absence of clarity is the key reason for the sector's reluctance. Operators seek protection against political risk and the risk that a different government could refuse any agreement.
“They must be shielded from nationalization, that we’ve witnessed in Venezuela already.”
Ultimately, while political promises runs strong, the operational risks suggest a journey of extreme caution for any significant venture in the country's energy industry.
