Industry experts have voiced significant doubt regarding bullish predictions that US energy majors will quickly invest vast sums of dollars to revive the country's dilapidated energy sector.
Demand for Solid Guarantees
Absent an “iron-clad guarantee” of full reimbursement from the US federal government, analysts expect international firms to proceed with great care.
“It is premature to comment on any potential investments,” a spokesperson said in response.
The ambitious timeline of less than a year and a half was publicly proposed. However, industry projections suggest a more cautious outlook.
A More Realistic Schedule
“Chances are going to take 36 months for any kind of output increase,” said one industry expert.
Experts believe energy firms would likely spend:
- The first year: Navigating new regulatory frameworks.
- The second year: Commencing reconstruction of infrastructure.
- Final phase: Starting to boost production.
This suggests an boost of around half a million barrels per day possibly by late 2028.
Appetite Compared to Readiness for Spending
Analysts draw a key distinction between multinationals’ interest and their willingness to spend substantially.
“In my view their interest is an high score, on a scale of ten. I think their readiness is a mid-range score, because there is significant uncertainty yet.”
Experienced operators in the country share this sentiment. The thinking is that companies will publicly express enthusiasm while actually moving with deliberate slowness.
The Colossal Cost
The required outlay would be colossal. Independent analysis suggest that increasing production by between 500,000 and a million barrels per day would require more than $10 billion in funding over several years.
However, rebuilding 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 Pending Question of Government Backing
The prospect of oil giants being paid back by the federal government has been repeatedly raised. Nevertheless, specific plans on such a mechanism have so far not been announced.
This lack of certainty is the key factor behind the industry's caution. Firms seek safeguards against sovereign risk and the possibility that a different president could renege on any agreement.
“They must be insured against nationalization, that we’ve witnessed in Venezuela already.”
Ultimately, while rhetorical promises runs high, the operational challenges suggest a road of slow deliberation for potential large-scale investment in the country's oil sector.