Industry experts have expressed considerable caution regarding bullish statements that US oil giants will swiftly commit tens of billions of dollars to revive the country's broken oil infrastructure.
The Need for Absolute Assurances
Absent an absolute assurance of complete repayment from the US federal government, analysts expect global energy giants to act with significant hesitation.
“It is too early to comment on any potential investments,” a representative commented this weekend.
The optimistic timeframe of less than 18 months has been boldly proposed. Yet, industry projections paint a longer timeline.
A More Realistic Outlook
“It’s probably going to take three years for any meaningful recovery in production,” noted an chief investment officer.
Experts believe operators would likely spend:
- Year one: Sorting through new operating agreements.
- The second year: Investing in rebuilding of infrastructure.
- Year three: Reaching a position to boost output.
The result could be an rise of around half a million bpd possibly by the end of the decade.
Appetite Compared to Appetite for Investment
There is a key distinction between companies' curiosity and their readiness to commit significantly.
“I think their attention is an eight, on a scale of one to 10. However, their willingness is a much lower, because there is no clarity yet.”
Experienced operators in the sector reinforce this sentiment. The expectation is that majors will politically talk up the opportunity while privately acting with extreme caution.
The Enormous Investment Required
The required outlay would be vast. Independent estimates suggest that adding between 500,000 and a million barrels per day would require more than $10 billion in capital spending over several years.
But, restoring production to previous levels of around 2.5 million barrels per day could require a monumental $80 billion to $90 billion over many more years.
The Outstanding Issue of Taxpayer Funding
The idea of energy companies being reimbursed by the government has been repeatedly mentioned. But, concrete details on such a mechanism have not yet been provided.
This lack of certainty is the key reason behind the industry's caution. Firms seek protection against political risk and the risk that a different president could cancel any agreement.
“You need to be shielded from political change, that we’ve witnessed in Venezuela before.”
Therefore, while political optimism runs strong, the operational realities suggest a road of slow deliberation for potential significant venture in the country's energy industry.
