Market specialists have voiced considerable skepticism regarding bullish claims that US energy majors will quickly invest billions of dollars to fix the country's broken energy sector.
Demand for Absolute Guarantees
Lacking an solid promise of complete repayment from the American government, analysts expect international firms to move with significant hesitation.
“It seems too early to discuss any future business activities,” a representative said in response.
The ambitious schedule of under a year and a half was boldly suggested. Yet, expert analyses suggest a different picture.
A Probable Schedule
“Chances are going to take multiple years for any kind of output increase,” noted one chief investment officer.
The analysis indicates energy firms would likely spend:
- The first year: Securing new government and security contracts.
- Year two: Beginning reconstruction of infrastructure.
- Final phase: Reaching a position to significantly ramp up output.
The result could be an increase of around half a million bpd possibly by the end of the decade.
Interest vs. Readiness for Risk
Experts make a critical difference between companies' curiosity and their willingness to spend significantly.
“In my view their curiosity is an eight, on a range of ten. However, their readiness is a four or five, because there is significant uncertainty yet.”
Seasoned diplomats in the sector echo this caution. The expectation is that firms will politically call it fantastic while actually proceeding with deliberate slowness.
The Enormous Cost
The financial investment would be colossal. Independent estimates suggest that adding between half a million and a million bpd would require in excess of $10 billion in investment over several years.
But, returning output to historical levels of around 2.5 million barrels per day could require a massive $80 billion to $90 billion over six or seven years.
The Outstanding Issue of Federal Guarantees
The suggestion of firms being compensated by the federal government has been repeatedly mentioned. However, specific plans on such a mechanism have not yet been forthcoming.
Without a solid plan is the main factor for the industry's hesitation. Operators seek protection against sovereign risk and the possibility that a subsequent president could renege on any promise.
“They must be protected from sovereign risk, that we’ve experienced in Venezuela already.”
In summary, while rhetorical confidence runs strong, the operational risks suggest a journey of slow deliberation for any major venture in the country's energy industry.
