Industry experts have expressed considerable caution regarding optimistic statements that US large firms will swiftly invest billions of dollars to fix the country's broken energy sector.
The Need for Absolute Protections
Without an absolute assurance of financial backing from the American government, analysts expect multinational oil companies to act with significant hesitation.
“It seems too early to speculate on any upcoming plans,” a spokesperson said in response.
The ambitious timeline of under 18 months was publicly proposed. However, industry projections indicate a different picture.
A Likely Timeline
“Chances are going to take three years for any kind of recovery in production,” noted one industry expert.
He suggested energy firms would likely spend:
- Initial phase: Sorting through new government and security contracts.
- Year two: Commencing reconstruction of facilities.
- Year three: Being able to boost yield.
The result could be an increase of around 500,000 barrels per day maybe by 2029.
Interest vs. Willingness for Investment
Experts make a key distinction between multinationals’ interest and their willingness to spend heavily.
“In my view their curiosity is an eight, on a scale of ten. I think their willingness is a mid-range score, because there is no clarity yet.”
Veteran observers in the region echo this view. The thinking is that majors will publicly talk up the opportunity while actually acting with great care.
The Vast Price Tag
The required outlay would be enormous. Research estimates suggest that adding between half a million and a million barrels per day would require in excess of $10 billion in capital spending over two to three years.
Yet, returning output to peak levels of around 2.5 million barrels per day could require a monumental $80 billion to $90 billion over six or seven years.
The Outstanding Issue of Government Backing
The prospect of energy companies being reimbursed by the federal government has been repeatedly floated. However, concrete details on such a mechanism have so far not been provided.
This lack of clarity is the primary impediment for the sector's caution. Firms seek protection against political risk and the chance that a subsequent administration could renege on any agreement.
“They must be shielded from political change, that we’ve experienced in Venezuela before.”
Therefore, while rhetorical promises runs high, the financial risks suggest a road of extreme caution for any large-scale financial commitment in the country's energy industry.
