Market specialists have voiced deep skepticism regarding optimistic statements that US energy majors will swiftly invest tens of billions of dollars to revive the country's crumbling energy sector.
Demand for Absolute Guarantees
Without an “iron-clad guarantee” of financial backing from the US federal government, analysts expect multinational oil companies to move with great care.
“It seems premature to comment on any future business activities,” a representative stated in response.
The aggressive schedule of under a year and a half has been publicly outlined. Yet, industry projections suggest a longer timeline.
A More Realistic Schedule
“Chances are going to take multiple years for any kind of recovery in production,” noted one industry expert.
Experts believe energy firms would likely spend:
- The first year: Sorting through new operating agreements.
- Year two: Beginning overhaul of facilities.
- Year three: Reaching a position to meaningfully increase yield.
The result could be an increase of around half a million bpd maybe by the end of the decade.
Appetite Compared to Readiness for Risk
There is a critical difference between companies' curiosity and their willingness to spend heavily.
“In my view their attention is an eight, on a scale of ten. However, their readiness is a mid-range score, because there is a lack of certainty yet.”
Veteran operators in the sector share this sentiment. The expectation is that majors will politically talk up the opportunity while actually moving with extreme caution.
The Enormous Price Tag
The required outlay would be colossal. Independent estimates suggest that increasing production by between 500,000 and a million bpd would require more than $10 billion in capital spending over several years.
Yet, returning output to peak levels of around 2.5 million barrels per day could require a staggering $80 billion to $90 billion over six or seven years.
The Unanswered Issue of Government Backing
The idea of oil giants being compensated by the government has been repeatedly floated. But, concrete details on this proposal have not yet been forthcoming.
Without a solid plan is the key reason for the sector's hesitation. Firms seek protection against sovereign risk and the possibility that a future administration could renege on any promise.
“They must be insured against sovereign risk, that we’ve seen in Venezuela previously.”
Ultimately, while rhetorical optimism runs high, the practical realities suggest a path of extreme caution for any significant venture in the country's energy industry.
