Market specialists have shown considerable skepticism regarding optimistic statements that US large firms will rapidly pump tens of billions of dollars to fix the country's crumbling energy sector.
Requirement of Absolute Guarantees
Without an “iron-clad guarantee” of complete repayment from the American government, experts believe global energy giants to proceed with extreme caution.
“It is premature to speculate on any upcoming plans,” a representative said recently.
The ambitious timeframe of under a year and a half has been boldly proposed. However, realistic assessments paint a different picture.
A Likely Schedule
“Chances are going to take multiple years for any significant recovery in production,” noted one chief investment officer.
Experts believe energy firms would likely spend:
- Year one: Sorting through new operating agreements.
- Year two: Beginning rebuilding of infrastructure.
- Year three: Reaching a position to boost production.
The result could be an rise of around 500,000 bpd possibly by the end of the decade.
Desire Versus Willingness for Investment
There is a key distinction between companies' curiosity and their appetite to invest heavily.
“I believe their curiosity is an high score, on a scale of one to 10. But their appetite is a mid-range score, because there is no clarity yet.”
Experienced observers in the country share this caution. The thinking is that companies will publicly call it fantastic while privately acting with great care.
The Vast Investment Required
The monetary bill would be vast. Independent estimates suggest that increasing production by between half a million and a million barrels per day would require more than $10 billion in investment over several years.
Yet, restoring output to previous levels of around 2.5 million bpd could require a monumental $80 billion to $90 billion over many more years.
The Pending Issue of Federal Guarantees
The prospect of oil giants being reimbursed by the US taxpayer has been often floated. But, specific plans on this proposal have not yet been forthcoming.
Without certainty is the primary factor for the sector's reluctance. Operators seek guarantees against sovereign risk and the possibility that a different government could refuse any agreement.
“You need to be insured against sovereign risk, that we’ve experienced in Venezuela before.”
Therefore, while political promises runs strong, the practical risks suggest a journey of extreme caution for any significant venture in the country's energy industry.
