Industry experts have expressed deep caution regarding bullish predictions that American energy majors will quickly pump tens of billions of dollars to revive the country's broken energy sector.
The Need for Absolute Guarantees
Without an absolute assurance of full reimbursement from the Washington, analysts expect global energy giants to proceed with extreme caution.
“It seems too early to speculate on any potential investments,” a representative stated in response.
The aggressive timeline of under 18 months has been boldly suggested. Nevertheless, expert analyses paint a longer timeline.
A Likely Schedule
“It’s probably going to take 36 months for any kind of output increase,” commented an energy analyst.
The analysis indicates energy firms would likely spend:
- Year one: Sorting through new government and security contracts.
- The second year: Beginning overhaul of equipment.
- Year three: Being able to meaningfully increase output.
This suggests an rise of around 500,000 bpd possibly by the end of the decade.
Desire Versus Willingness for Risk
Experts make a important separation between companies' curiosity and their readiness to commit substantially.
“I think their curiosity is an high score, on a scale of one to 10. But their appetite is a mid-range score, because there is significant uncertainty yet.”
Experienced diplomats in the sector share this caution. The thinking is that majors will politically talk up the opportunity while privately proceeding with great care.
The Colossal Price Tag
The monetary investment would be enormous. Independent projections suggest that adding between 500,000 and a million barrels per day would require over $10 billion in funding over several years.
Yet, rebuilding production to peak levels of around 2.5 million bpd could require a massive $80 billion to $90 billion over six or seven years.
The Outstanding Issue of Taxpayer Funding
The prospect of energy companies being reimbursed by the US taxpayer has been repeatedly floated. Nevertheless, concrete details on any guarantee have not yet been provided.
This lack of a solid plan is the key factor for the industry's hesitation. Firms seek protection against political risk and the risk that a future government could cancel any promise.
“They must be protected from sovereign risk, that we’ve experienced in Venezuela already.”
Ultimately, while political optimism runs strong, the financial challenges suggest a path of measured steps for any major venture in the country's energy industry.
