Industry experts have expressed considerable caution regarding bullish predictions that US large firms will swiftly commit vast sums of dollars to rebuild the country's dilapidated production facilities.
The Need for Absolute Assurances
Without an solid promise of full reimbursement from the American government, experts believe global energy giants to move with extreme caution.
“It seems premature to comment on any future business activities,” a spokesperson commented recently.
The ambitious timeline of under 18 months was boldly suggested. Nevertheless, realistic assessments paint a longer timeline.
A Likely Schedule
“It is likely going to take three years for any kind of output increase,” commented one energy analyst.
The analysis indicates oil companies would likely spend:
- Initial phase: Sorting through new regulatory frameworks.
- Year two: Investing in rebuilding of infrastructure.
- Final phase: Being able to boost output.
This would lead to an boost of around 500,000 bpd perhaps by the end of the decade.
Appetite Compared to Readiness for Investment
Experts make a critical difference between firms' attention and their willingness to spend substantially.
“I think their interest is an eight, on a scale of one to 10. I think their readiness is a mid-range score, because there is no clarity yet.”
Experienced observers in the sector share this view. The thinking is that majors will politically express enthusiasm while privately acting with deliberate slowness.
The Colossal Investment Required
The required bill would be enormous. Independent projections suggest that adding between 500,000 and a million barrels per day would require more than $10 billion in investment over two to three years.
However, returning output to historical levels of around 2.5 million bpd could require a massive $80 billion to $90 billion over many more years.
The Pending Issue of Government Backing
The suggestion of oil giants being compensated by the government has been often mentioned. However, specific plans on any guarantee have so far not been announced.
This lack of certainty is the primary factor for the sector's reluctance. Firms seek safeguards against nationalization and the risk that a subsequent administration could cancel any agreement.
“They must be insured against sovereign risk, that we’ve seen in Venezuela already.”
Therefore, while political confidence runs high, the practical challenges suggest a journey of slow deliberation for any significant venture in the country's oil sector.
