Energy analysts have voiced considerable caution regarding bullish claims that US energy majors will rapidly pump vast sums of dollars to fix the country's broken production facilities.
Demand for Absolute Protections
Without an solid promise of full reimbursement from the American government, analysts expect multinational oil companies to move with great care.
“It would be premature to comment on any future business activities,” an official said in response.
The aggressive schedule of less than a year and a half was publicly suggested. However, realistic assessments indicate a more cautious outlook.
A Probable Outlook
“It is likely going to take multiple years for any kind of output increase,” commented an industry expert.
Experts believe operators would likely spend:
- The first year: Sorting through new operating agreements.
- The second year: Investing in overhaul of infrastructure.
- Year three: Being able to significantly ramp up production.
This would lead to an rise of around half a million barrels per day possibly by 2029.
Appetite Compared to Readiness for Investment
There is a critical difference between firms' attention and their readiness to commit heavily.
“I believe their interest is an eight, on a range of ten. But their appetite is a much lower, because there is a lack of certainty yet.”
Experienced observers in the sector reinforce this view. The thinking is that firms will publicly express enthusiasm while actually moving with great care.
The Vast Cost
The required outlay would be enormous. Independent analysis suggest that increasing production by between 500,000 and a million bpd would require over $10 billion in funding over two to three years.
But, rebuilding production to peak levels of around 2.5 million bpd could require a monumental $80 billion to $90 billion over many more years.
The Pending Question of Federal Guarantees
The suggestion of firms being reimbursed by the US taxpayer has been often floated. However, specific plans on such a mechanism have so far not been forthcoming.
The absence of a solid plan is the primary factor for the industry's caution. Firms seek guarantees against sovereign risk and the risk that a future president could renege on any agreement.
“They must be protected from political change, that we’ve experienced in Venezuela previously.”
Ultimately, while political optimism runs strong, the financial risks suggest a road of extreme caution for any major venture in the country's oil sector.
