Industry experts have shown deep doubt regarding bullish claims that US oil giants will swiftly commit billions of dollars to rebuild the country's broken production facilities.
Demand for Absolute Assurances
Absent an solid promise of financial backing from the American government, experts believe global energy giants to move with extreme caution.
“It would be too early to speculate on any future business activities,” a representative commented in response.
The ambitious timeframe of under 18 months was boldly outlined. Yet, industry projections indicate a different picture.
A Likely Schedule
“Chances are going to take multiple years for any meaningful recovery in production,” commented one chief investment officer.
Experts believe oil companies would likely spend:
- The first year: Securing new government and security contracts.
- Year two: Commencing rebuilding of facilities.
- Final phase: Being able to meaningfully increase output.
This would lead to an increase of around 500,000 bpd maybe by the end of the decade.
Interest vs. Readiness for Spending
There is a key distinction between companies' curiosity and their appetite to invest substantially.
“In my view their interest is an high score, on a range of one to 10. However, their willingness is a four or five, because there is significant uncertainty yet.”
Seasoned diplomats in the sector echo this view. The thinking is that companies will publicly talk up the opportunity while actually acting with deliberate slowness.
The Enormous Price Tag
The required investment would be colossal. Research projections suggest that increasing production by between half a million and a million bpd would require over $10 billion in funding over several years.
But, rebuilding production to peak levels of around 2.5 million barrels per day could require a staggering $80 billion to $90 billion over many more years.
The Outstanding Issue of Taxpayer Funding
The suggestion of energy companies being reimbursed by the US taxpayer has been often floated. However, formal assurances on any guarantee have so far not been announced.
This lack of a solid plan is the key impediment for the sector's hesitation. Firms seek safeguards against nationalization and the possibility that a subsequent president could refuse any promise.
“You need to be shielded from sovereign risk, that we’ve seen in Venezuela previously.”
Ultimately, while political confidence runs strong, the practical risks suggest a road of extreme caution for any significant financial commitment in the country's oil sector.
