Energy analysts have voiced deep skepticism regarding recent predictions that US large firms will swiftly invest vast sums of dollars to fix the country's broken energy sector.
Requirement of Absolute Guarantees
Without an solid promise of financial backing from the Washington, analysts expect international firms to proceed with significant hesitation.
“It would be premature to discuss any future business activities,” an official said this weekend.
The optimistic timeframe of less than a year and a half has been boldly outlined. However, realistic assessments suggest a longer timeline.
A Probable Schedule
“Chances are going to take multiple years for any kind of production bounce,” commented an chief investment officer.
He suggested oil companies would likely spend:
- Initial phase: Securing new government and security contracts.
- The second year: Commencing rebuilding of equipment.
- The third year: Being able to significantly ramp up output.
The result could be an increase of around half a million bpd maybe by the end of the decade.
Desire Versus Readiness for Investment
Experts make a key distinction between firms' attention and their appetite to invest heavily.
“I think their curiosity is an eight, on a range of ten. But their appetite is a mid-range score, because there is a lack of certainty yet.”
Experienced observers in the sector reinforce this sentiment. The expectation is that firms will publicly talk up the opportunity while in practice acting with great care.
The Colossal Investment Required
The required investment would be enormous. Research analysis suggest that increasing production by between 500,000 and a million bpd would require over $10 billion in funding over two to three years.
However, restoring output to peak levels of around 2.5 million barrels per day could require a staggering $80 billion to $90 billion over six or seven years.
The Unanswered Question of Taxpayer Funding
The prospect of energy companies being paid back by the government has been often raised. However, specific plans on any guarantee have not yet been forthcoming.
The absence of clarity is the main impediment behind the industry's reluctance. Companies seek safeguards against political risk and the chance that a subsequent administration could renege on any agreement.
“You need to be protected from nationalization, that we’ve experienced in Venezuela already.”
Ultimately, while political optimism runs strong, the practical realities suggest a path of extreme caution for any major venture in the country's oil sector.
