Industry experts have voiced deep doubt regarding recent claims that US energy majors will rapidly invest tens of billions of dollars to revive the country's crumbling production facilities.
The Need for Solid Assurances
Lacking an “iron-clad guarantee” of financial backing from the US federal government, experts believe multinational oil companies to proceed with significant hesitation.
“It seems hasty to comment on any future business activities,” a representative commented recently.
The optimistic timeframe of under a year and a half has been publicly proposed. Nevertheless, industry projections suggest a longer timeline.
A Probable Outlook
“Chances are going to take 36 months for any kind of recovery in production,” noted one industry expert.
Experts believe oil companies would likely spend:
- Year one: Sorting through new government and security contracts.
- Following phase: Commencing rebuilding of equipment.
- Final phase: Reaching a position to meaningfully increase production.
This suggests an increase of around 500,000 barrels per day possibly by 2029.
Appetite Compared to Willingness for Risk
Experts make a key distinction between companies' curiosity and their appetite to invest significantly.
“I think their interest is an high score, on a scale of one to 10. I think their appetite is a four or five, because there is significant uncertainty yet.”
Experienced diplomats in the region share this sentiment. The thinking is that majors will politically talk up the opportunity while privately moving with great care.
The Enormous Price Tag
The required investment would be vast. University projections suggest that increasing production by between 500,000 and a million bpd would require in excess of $10 billion in investment over two to three years.
Yet, rebuilding output to previous 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 Taxpayer Funding
The prospect of energy companies being paid back by the federal government has been often mentioned. However, specific plans on such a mechanism have so far not been announced.
Without a solid plan is the primary impediment for the industry's reluctance. Operators seek guarantees against nationalization and the chance that a future government could renege on any deal.
“They must be insured against political change, that we’ve seen in Venezuela previously.”
Ultimately, while rhetorical optimism runs high, the operational risks suggest a journey of extreme caution for any large-scale investment in the country's oil sector.
