Market specialists have voiced deep skepticism regarding bullish predictions that US large firms will rapidly invest billions of dollars to revive the country's broken energy sector.
The Need for Solid Guarantees
Lacking an solid promise of complete repayment from the US federal government, specialists predict multinational oil companies to move with great care.
“It seems premature to speculate on any future business activities,” a spokesperson said recently.
The ambitious timeframe of less than 18 months was boldly outlined. Nevertheless, expert analyses indicate a different picture.
A Likely Outlook
“It is likely going to take 36 months for any kind of production bounce,” noted an energy analyst.
He suggested oil companies would likely spend:
- Initial phase: Securing new operating agreements.
- Year two: Commencing reconstruction of infrastructure.
- Year three: Starting to significantly ramp up output.
This would lead to an rise of around 500,000 barrels per day possibly by the end of the decade.
Interest vs. Readiness for Risk
Analysts draw a critical difference between companies' curiosity and their appetite to invest heavily.
“In my view their attention is an eight, on a range of ten. I think their readiness is a four or five, because there is a lack of certainty yet.”
Experienced diplomats in the region echo this sentiment. The expectation is that majors will publicly call it fantastic while in practice acting with extreme caution.
The Colossal Investment Required
The required investment would be vast. Research estimates suggest that increasing production by between 500,000 and a million bpd would require more than $10 billion in investment over several years.
But, returning output to peak levels of around 2.5 million barrels per day could require a massive $80 billion to $90 billion over six or seven years.
The Pending Question of Government Backing
The idea of energy companies being paid back by the federal government has been often mentioned. Nevertheless, specific plans on any guarantee have not yet been announced.
Without a solid plan is the primary reason behind the sector's hesitation. Companies seek protection against political risk and the possibility that a subsequent government could renege on any promise.
“They must be protected from nationalization, that we’ve experienced in Venezuela already.”
Therefore, while political promises runs high, the operational risks suggest a road of slow deliberation for potential major venture in the country's oil sector.
