Industry experts have voiced deep doubt regarding optimistic statements that US oil giants will rapidly invest vast sums of dollars to fix the country's broken energy sector.
Demand for Solid Guarantees
Lacking an solid promise of financial backing from the US federal government, analysts expect international firms to act with significant hesitation.
“It seems premature to comment on any potential investments,” a spokesperson said this weekend.
The optimistic timeline of under a year and a half was publicly proposed. Yet, expert analyses indicate a longer timeline.
A Probable Outlook
“It’s probably going to take three years for any significant recovery in production,” commented one industry expert.
The analysis indicates energy firms would likely spend:
- Year one: Navigating new operating agreements.
- Year two: Beginning rebuilding of infrastructure.
- The third year: Being able to significantly ramp up production.
The result could be an rise of around half a million bpd possibly by the end of the decade.
Appetite Compared to Willingness for Investment
Experts make a critical difference between multinationals’ interest and their appetite to invest substantially.
“I believe their curiosity is an high score, on a scale of ten. But their willingness is a four or five, because there is a lack of certainty yet.”
Seasoned operators in the region reinforce this view. They believe that firms will politically call it fantastic while actually proceeding with extreme caution.
The Enormous Cost
The required outlay would be colossal. Research estimates suggest that adding between half a million and a million bpd would require more than $10 billion in investment over two to three years.
However, returning output to previous 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 Government Backing
The suggestion of energy companies being paid back by the federal government has been often mentioned. Nevertheless, specific plans on such a mechanism have so far not been announced.
Without a solid plan is the primary impediment behind the sector's hesitation. Operators seek guarantees against sovereign risk and the possibility that a subsequent administration could renege on any promise.
“You need to be insured against nationalization, that we’ve experienced in Venezuela already.”
Therefore, while political promises runs strong, the operational challenges suggest a path of extreme caution for any major investment in the country's energy industry.
