Industry experts have expressed considerable skepticism regarding bullish claims that US energy majors will swiftly invest vast sums of dollars to fix the country's crumbling energy sector.
Requirement of Iron-Clad Guarantees
Without an solid promise of full reimbursement from the Washington, specialists predict international firms to act with extreme caution.
“It would be premature to comment on any potential investments,” a representative said this weekend.
The ambitious timeframe of under a year and a half was boldly proposed. Nevertheless, industry projections suggest a more cautious outlook.
A Likely Schedule
“Chances are going to take multiple years for any meaningful output increase,” said one industry expert.
He suggested oil companies would likely spend:
- Year one: Securing new regulatory frameworks.
- Year two: Beginning overhaul of infrastructure.
- Year three: Starting to significantly ramp up production.
This suggests an increase of around 500,000 barrels per day maybe by the end of the decade.
Interest vs. Willingness for Risk
There is a critical difference between companies' curiosity and their willingness to spend heavily.
“I believe their attention is an eight, on a scale of one to 10. However, their willingness is a mid-range score, because there is significant uncertainty yet.”
Seasoned diplomats in the sector reinforce this view. The expectation is that majors will politically call it fantastic while in practice acting with great care.
The Vast Investment Required
The financial bill would be enormous. University analysis suggest that increasing production by between 500,000 and a million bpd would require more than $10 billion in funding over several years.
However, rebuilding output to historical levels of around 2.5 million barrels per day could require a massive $80 billion to $90 billion over six or seven years.
The Outstanding Question of Government Backing
The prospect of energy companies being compensated by the US taxpayer has been often mentioned. But, concrete details on such a mechanism have so far not been announced.
Without a solid plan is the key reason behind the industry's reluctance. Companies seek safeguards against sovereign risk and the chance that a different president could cancel any deal.
“They must be shielded from nationalization, that we’ve witnessed in Venezuela before.”
Therefore, while rhetorical optimism runs strong, the financial realities suggest a path of slow deliberation for any major investment in the country's oil sector.
