Energy analysts have shown considerable doubt regarding recent statements that US large firms will rapidly pump billions of dollars to fix the country's broken oil infrastructure.
Demand for Iron-Clad Assurances
Without an solid promise of full reimbursement from the US federal government, experts believe international firms to move with great care.
“It would be too early to discuss any potential investments,” a representative stated this weekend.
The optimistic timeframe of less than a year and a half has been publicly proposed. Yet, realistic assessments paint a longer timeline.
A Probable Outlook
“Chances are going to take multiple years for any significant recovery in production,” said one industry expert.
Experts believe oil companies would likely spend:
- The first year: Navigating new operating agreements.
- Year two: Investing in rebuilding of facilities.
- Final phase: Starting to meaningfully increase yield.
This suggests an rise of around half a million barrels per day maybe by the end of the decade.
Appetite Compared to Appetite for Risk
There is a critical difference between companies' curiosity and their appetite to invest significantly.
“In my view their curiosity is an eight, on a range of ten. I think their willingness is a four or five, because there is significant uncertainty yet.”
Seasoned operators in the sector echo this sentiment. They believe that companies will politically talk up the opportunity while in practice proceeding with great care.
The Colossal Cost
The monetary investment would be colossal. Research analysis suggest that increasing production by between half a million and a million barrels per day would require more than $10 billion in capital spending over several years.
Yet, returning production to previous levels of around 2.5 million bpd could require a monumental $80 billion to $90 billion over many more years.
The Outstanding Issue of Government Backing
The idea of firms being reimbursed by the government has been often mentioned. But, specific plans on any guarantee have so far not been announced.
This lack of certainty is the main impediment for the sector's hesitation. Operators seek safeguards against political risk and the possibility that a future president could cancel any promise.
“They must be insured against sovereign risk, that we’ve seen in Venezuela before.”
Ultimately, while political promises runs strong, the practical realities suggest a road of extreme caution for potential significant investment in the country's oil sector.
