Energy analysts have shown considerable skepticism regarding optimistic predictions that US oil giants will rapidly invest billions of dollars to rebuild the country's dilapidated energy sector.
The Need for Iron-Clad Assurances
Absent an solid promise of financial backing from the American government, specialists predict global energy giants to act with significant hesitation.
“It would be too early to discuss any future business activities,” a spokesperson said in response.
The aggressive timeframe of less than a year and a half was boldly suggested. However, realistic assessments suggest a different picture.
A Probable Outlook
“It’s probably going to take 36 months for any meaningful recovery in production,” said an chief investment officer.
He suggested energy firms would likely spend:
- Year one: Securing new government and security contracts.
- The second year: Beginning overhaul of facilities.
- Final phase: Being able to significantly ramp up production.
This suggests an increase of around 500,000 barrels per day perhaps by the end of the decade.
Interest vs. Appetite for Spending
Analysts draw a important separation between firms' attention and their appetite to invest significantly.
“In my view their attention is an high score, on a range of ten. But their willingness is a mid-range score, because there is no clarity yet.”
Seasoned observers in the region share this caution. The expectation is that firms will publicly call it fantastic while actually moving with extreme caution.
The Colossal Cost
The required outlay would be vast. Research estimates suggest that increasing production by between half a million and a million barrels per day would require in excess of $10 billion in funding over several years.
But, returning production to historical levels of around 2.5 million bpd could require a monumental $80 billion to $90 billion over six or seven years.
The Pending Question of Taxpayer Funding
The idea of energy companies being paid back by the US taxpayer has been repeatedly floated. However, concrete details on any guarantee have not yet been forthcoming.
Without clarity is the main impediment behind the sector's hesitation. Operators seek guarantees against political risk and the risk that a future administration could renege on any agreement.
“They must be protected from political change, that we’ve seen in Venezuela already.”
Therefore, while political promises runs strong, the practical realities suggest a road of extreme caution for any major venture in the country's oil sector.
