Energy analysts have voiced deep doubt regarding bullish statements that American energy majors will quickly commit tens of billions of dollars to rebuild the country's broken oil infrastructure.
Demand for Absolute Protections
Lacking an “iron-clad guarantee” of full reimbursement from the US federal government, analysts expect multinational oil companies to move with extreme caution.
“It is too early to discuss any future business activities,” a representative commented this weekend.
The aggressive timeline of less than 18 months was publicly proposed. However, expert analyses paint a longer timeline.
A Likely Outlook
“Chances are going to take 36 months for any significant output increase,” commented one industry expert.
He suggested energy firms would likely spend:
- Initial phase: Securing new regulatory frameworks.
- Year two: Commencing overhaul of infrastructure.
- The third year: Starting to significantly ramp up output.
The result could be an rise of around half a million barrels per day perhaps by the end of the decade.
Interest vs. Readiness for Risk
Experts make a critical difference between firms' attention and their readiness to commit heavily.
“I believe their attention is an high score, on a scale of one to 10. However, their willingness is a mid-range score, because there is no clarity yet.”
Seasoned diplomats in the sector echo this caution. The expectation is that majors will politically talk up the opportunity while actually acting with great care.
The Vast Price Tag
The required outlay would be enormous. University projections suggest that adding between 500,000 and a million barrels per day would require over $10 billion in investment over two to three years.
But, rebuilding output to previous levels of around 2.5 million bpd could require a staggering $80 billion to $90 billion over six or seven years.
The Unanswered Question of Federal Guarantees
The idea of energy companies being reimbursed by the government has been repeatedly mentioned. However, formal assurances on any guarantee have so far not been forthcoming.
Without clarity is the main factor behind the industry's caution. Companies seek safeguards against nationalization and the possibility that a different president could renege on any promise.
“You need to be protected from nationalization, that we’ve experienced in Venezuela already.”
Ultimately, while political confidence runs strong, the practical challenges suggest a journey of measured steps for any major financial commitment in the country's energy industry.
