Industry experts have shown deep skepticism regarding bullish statements that American energy majors will swiftly commit vast sums of dollars to fix the country's dilapidated energy sector.
The Need for Iron-Clad Assurances
Without an solid promise of financial backing from the Washington, experts believe global energy giants to move with significant hesitation.
“It would be hasty to speculate on any upcoming plans,” a representative said this weekend.
The ambitious schedule of under a year and a half was boldly suggested. Nevertheless, industry projections suggest a different picture.
A Probable Timeline
“It is likely going to take 36 months for any significant output increase,” commented an energy analyst.
He suggested energy firms would likely spend:
- The first year: Securing new government and security contracts.
- Year two: Commencing reconstruction of equipment.
- Year three: Being able to meaningfully increase output.
This would lead to an rise of around half a million bpd perhaps by the end of the decade.
Desire Versus Willingness for Risk
There is a key distinction between firms' attention and their willingness to spend heavily.
“I think their interest is an eight, on a range of ten. I think their willingness is a much lower, because there is no clarity yet.”
Seasoned diplomats in the sector reinforce this caution. The thinking is that companies will politically call it fantastic while privately acting with deliberate slowness.
The Vast Price Tag
The monetary bill would be enormous. University projections suggest that adding between half a million and a million barrels per day would require over $10 billion in funding over several years.
But, restoring production 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 idea of firms being paid back by the government has been often mentioned. But, specific plans on such a mechanism have not yet been announced.
This lack of a solid plan is the primary reason for the industry's reluctance. Companies seek protection against political risk and the possibility that a future president could renege on any promise.
“They must be shielded from political change, that we’ve witnessed in Venezuela already.”
In summary, while political promises runs strong, the financial risks suggest a road of slow deliberation for potential significant financial commitment in the country's energy industry.
