Energy analysts have shown significant skepticism regarding bullish predictions that US large firms will rapidly pump vast sums of dollars to revive the country's broken energy sector.
Demand for Iron-Clad Assurances
Without an absolute assurance of complete repayment from the US federal government, analysts expect international firms to move with significant hesitation.
“It is too early to comment on any upcoming plans,” a representative stated in response.
The optimistic timeline of under 18 months has been boldly outlined. Yet, expert analyses suggest a longer timeline.
A Probable Schedule
“It is likely going to take 36 months for any meaningful output increase,” commented an chief investment officer.
Experts believe oil companies would likely spend:
- The first year: Navigating new regulatory frameworks.
- The second year: Commencing overhaul of equipment.
- Final phase: Being able to meaningfully increase production.
The result could be an increase of around 500,000 barrels per day perhaps by the end of the decade.
Desire Versus Readiness for Spending
There is a key distinction between companies' curiosity and their readiness to commit heavily.
“In my view their curiosity is an high score, on a scale of ten. I think their willingness is a much lower, because there is significant uncertainty yet.”
Veteran observers in the region share this caution. They believe that companies will politically talk up the opportunity while in practice moving with great care.
The Enormous Investment Required
The financial outlay would be colossal. Independent projections suggest that increasing production by between half a million and a million bpd would require in excess of $10 billion in investment over two to three years.
But, returning production to peak levels of around 2.5 million bpd could require a staggering $80 billion to $90 billion over many more years.
The Outstanding Issue of Government Backing
The idea of energy companies being compensated by the US taxpayer has been repeatedly raised. However, concrete details on such a mechanism have so far not been provided.
Without certainty is the key reason for the industry's reluctance. Firms seek guarantees against political risk and the risk that a subsequent government could renege on any deal.
“They must be shielded from nationalization, that we’ve seen in Venezuela already.”
In summary, while rhetorical promises runs high, the financial realities suggest a road of slow deliberation for any significant financial commitment in the country's oil sector.
