Industry experts have shown deep skepticism regarding bullish statements that US energy majors will rapidly pump billions of dollars to fix the country's broken oil infrastructure.
The Need for Iron-Clad Guarantees
Without an “iron-clad guarantee” of full reimbursement from the Washington, specialists predict global energy giants to proceed with great care.
“It is hasty to speculate on any upcoming plans,” an official commented this weekend.
The ambitious timeframe of less than a year and a half has been publicly proposed. Yet, industry projections paint a longer timeline.
A Probable Timeline
“Chances are going to take multiple years for any meaningful production bounce,” said one chief investment officer.
He suggested oil companies would likely spend:
- Initial phase: Sorting through new operating agreements.
- The second year: Commencing overhaul of equipment.
- Final phase: Being able to meaningfully increase production.
This suggests an rise of around 500,000 barrels per day perhaps by the end of the decade.
Desire Versus Willingness for Risk
There is a key distinction between multinationals’ interest and their willingness to spend substantially.
“In my view their interest is an eight, on a scale of ten. I think their willingness is a mid-range score, because there is significant uncertainty yet.”
Experienced observers in the sector echo this view. The thinking is that majors will publicly express enthusiasm while actually moving with great care.
The Vast Price Tag
The required bill would be enormous. University estimates suggest that adding between 500,000 and a million bpd would require more than $10 billion in investment over two to three years.
However, rebuilding output to previous levels of around 2.5 million barrels per day could require a monumental $80 billion to $90 billion over many more years.
The Unanswered Issue of Government Backing
The idea of energy companies being paid back by the federal government has been repeatedly floated. Nevertheless, concrete details on any guarantee have not yet been forthcoming.
The absence of a solid plan is the main impediment for the sector's caution. Companies seek guarantees against political risk and the risk that a different president could refuse any promise.
“It is essential to be insured against political change, that we’ve seen in Venezuela before.”
Therefore, while rhetorical promises runs strong, the operational challenges suggest a journey of extreme caution for potential significant investment in the country's energy industry.
