Market specialists have shown deep skepticism regarding optimistic statements that US energy majors will swiftly invest vast sums of dollars to rebuild the country's broken production facilities.
The Need for Absolute Protections
Without an absolute assurance of complete repayment from the American government, analysts expect global energy giants to move with great care.
“It would be premature to speculate on any future business activities,” an official commented this weekend.
The optimistic timeframe of under 18 months has been boldly suggested. Yet, expert analyses indicate a different picture.
A Probable Schedule
“Chances are going to take three years for any significant recovery in production,” noted one industry expert.
He suggested energy firms would likely spend:
- The first year: Sorting through new regulatory frameworks.
- Following phase: Commencing reconstruction of infrastructure.
- Final phase: Reaching a position to significantly ramp up output.
The result could be an increase of around half a million barrels per day perhaps by 2029.
Interest vs. Willingness for Investment
There is a critical difference between multinationals’ interest and their readiness to commit substantially.
“I think their interest is an eight, on a range of ten. I think their willingness is a much lower, because there is significant uncertainty yet.”
Veteran operators in the region echo this sentiment. The thinking is that majors will politically talk up the opportunity while privately proceeding with deliberate slowness.
The Colossal Cost
The required outlay would be colossal. Research estimates suggest that adding between half a million and a million bpd would require in excess of $10 billion in investment over two to three years.
But, rebuilding production to previous levels of around 2.5 million bpd could require a staggering $80 billion to $90 billion over many more years.
The Unanswered Question of Government Backing
The suggestion of oil giants being reimbursed by the US taxpayer has been repeatedly floated. Nevertheless, concrete details on any guarantee have not yet been announced.
This lack of clarity is the primary impediment for the sector's caution. Firms seek protection against political risk and the risk that a different government could refuse any deal.
“You need to be insured against sovereign risk, that we’ve seen in Venezuela previously.”
Ultimately, while political promises runs strong, the operational realities suggest a road of extreme caution for potential major investment in the country's oil sector.
