Industry experts have expressed deep skepticism regarding bullish predictions that US oil giants will quickly invest tens of billions of dollars to rebuild the country's broken oil infrastructure.
Requirement of Absolute Protections
Absent an absolute assurance of financial backing from the Washington, experts believe multinational oil companies to proceed with extreme caution.
“It is too early to speculate on any potential investments,” a spokesperson said this weekend.
The optimistic timeline of less than a year and a half has been boldly outlined. Nevertheless, expert analyses paint a longer timeline.
A Likely Timeline
“It is likely going to take three years for any kind of production bounce,” commented an chief investment officer.
He suggested operators would likely spend:
- Initial phase: Securing new government and security contracts.
- The second year: Investing in overhaul of infrastructure.
- Final phase: Being able to meaningfully increase yield.
This suggests an increase of around 500,000 barrels per day maybe by the end of the decade.
Appetite Compared to Readiness for Risk
Experts make a important separation between multinationals’ interest and their readiness to commit significantly.
“I believe their attention is an eight, on a scale of one to 10. However, their willingness is a much lower, because there is a lack of certainty yet.”
Experienced operators in the sector share this view. The expectation is that companies will publicly express enthusiasm while actually acting with deliberate slowness.
The Enormous Price Tag
The financial outlay would be vast. Independent estimates suggest that adding between half a million and a million bpd would require more than $10 billion in funding over two to three years.
However, rebuilding output to previous levels of around 2.5 million barrels per day could require a staggering $80 billion to $90 billion over many more years.
The Unanswered Question of Government Backing
The suggestion of energy companies being reimbursed by the US taxpayer has been repeatedly mentioned. But, specific plans on this proposal have not yet been announced.
This lack of clarity is the key impediment for the industry's hesitation. Operators seek safeguards against political risk and the risk that a subsequent president could refuse any deal.
“They must be insured against sovereign risk, that we’ve witnessed in Venezuela previously.”
Ultimately, while rhetorical promises runs high, the financial challenges suggest a journey of measured steps for potential significant investment in the country's energy industry.
