Industry experts have expressed significant skepticism regarding bullish statements that US large firms will swiftly commit tens of billions of dollars to fix the country's broken energy sector.
Requirement of Absolute Assurances
Absent an absolute assurance of complete repayment from the US federal government, experts believe international firms to proceed with great care.
“It would be premature to speculate on any future business activities,” a representative stated recently.
The ambitious timeline of less than a year and a half has been publicly suggested. Yet, realistic assessments paint a different picture.
A Likely Schedule
“It is likely going to take 36 months for any kind of production bounce,” said one industry expert.
Experts believe energy firms would likely spend:
- Initial phase: Navigating new regulatory frameworks.
- The second year: Beginning overhaul of equipment.
- Final phase: Being able to meaningfully increase yield.
The result could be an boost of around 500,000 bpd possibly by the end of the decade.
Desire Versus Appetite for Risk
Experts make a critical difference between companies' curiosity and their willingness to spend substantially.
“I believe their interest is an eight, on a range of one to 10. I think their readiness is a mid-range score, because there is a lack of certainty yet.”
Experienced observers in the sector reinforce this view. They believe that companies will politically talk up the opportunity while in practice moving with great care.
The Enormous Cost
The monetary outlay would be vast. Independent estimates suggest that increasing production by between half a million and a million barrels per day would require more than $10 billion in capital spending over several years.
But, returning output to previous levels of around 2.5 million barrels per day could require a massive $80 billion to $90 billion over many more years.
The Outstanding Question of Government Backing
The suggestion of firms being paid back by the US taxpayer has been often mentioned. Nevertheless, concrete details on such a mechanism have so far not been forthcoming.
Without clarity is the main impediment for the industry's caution. Companies seek guarantees against political risk and the chance that a future administration could refuse any deal.
“They must be insured against sovereign risk, that we’ve experienced in Venezuela before.”
In summary, while rhetorical promises runs high, the practical risks suggest a road of extreme caution for any significant financial commitment in the country's energy industry.
