Market specialists have voiced deep doubt regarding optimistic predictions that US oil giants will rapidly invest vast sums of dollars to fix the country's dilapidated production facilities.
The Need for Absolute Assurances
Absent an “iron-clad guarantee” of full reimbursement from the Washington, experts believe multinational oil companies to move with extreme caution.
“It is premature to speculate on any upcoming plans,” a representative said recently.
The ambitious schedule of less than a year and a half was publicly outlined. Yet, industry projections suggest a more cautious outlook.
A More Realistic Outlook
“It’s probably going to take multiple years for any significant production bounce,” said an energy analyst.
The analysis indicates energy firms would likely spend:
- Year one: Sorting through new regulatory frameworks.
- Following phase: Commencing overhaul of facilities.
- Final phase: Being able to boost output.
The result could be an rise of around half a million barrels per day maybe by 2029.
Appetite Compared to Appetite for Spending
There is a critical difference between companies' curiosity and their willingness to spend significantly.
“I think their curiosity is an eight, on a range of one to 10. I think their appetite is a mid-range score, because there is significant uncertainty yet.”
Veteran diplomats in the region echo this view. The thinking is that firms will politically call it fantastic while privately moving with deliberate slowness.
The Enormous Price Tag
The financial bill would be enormous. Independent projections suggest that increasing production by between 500,000 and a million barrels per day would require more than $10 billion in investment over several years.
But, returning output to peak levels of around 2.5 million bpd could require a massive $80 billion to $90 billion over six or seven years.
The Outstanding Question of Federal Guarantees
The prospect of energy companies being paid back by the US taxpayer has been repeatedly raised. But, specific plans on any guarantee have so far not been announced.
Without certainty is the key reason for the industry's reluctance. Operators seek protection against political risk and the possibility that a subsequent administration could refuse any promise.
“They must be protected from political change, that we’ve seen in Venezuela already.”
Therefore, while political optimism runs high, the operational challenges suggest a journey of measured steps for potential significant financial commitment in the country's energy industry.
