🔗 Share this article

Market specialists have shown considerable caution regarding optimistic claims that US oil giants will rapidly invest billions of dollars to rebuild the country's broken oil infrastructure.

Requirement of Absolute Protections

Lacking an absolute assurance of full reimbursement from the US federal government, analysts expect multinational oil companies to act with great care.

“It would be too early to speculate on any upcoming plans,” an official commented this weekend.

The ambitious timeframe of under 18 months was boldly outlined. However, industry projections paint a different picture.

A Probable Schedule

“It is likely going to take 36 months for any kind of output increase,” commented one energy analyst.

He suggested oil companies would likely spend:

• The first year: Navigating new regulatory frameworks.
• The second year: Beginning reconstruction of equipment.
• Year three: Starting to significantly ramp up output.

This suggests an increase of around half a million barrels per day perhaps by the end of the decade.

Desire Versus Willingness for Risk

Analysts draw a important separation between multinationals’ interest and their readiness to commit substantially.

“In my view their curiosity is an eight, on a scale of ten. But their readiness is a much lower, because there is a lack of certainty yet.”

Experienced observers in the sector share this sentiment. The thinking is that firms will publicly talk up the opportunity while privately acting with great care.

The Enormous Investment Required

The monetary bill would be enormous. Independent analysis suggest that increasing production by between 500,000 and a million barrels per day would require more than $10 billion in capital spending over several years.

But, returning production to previous levels of around 2.5 million bpd could require a monumental $80 billion to $90 billion over six or seven years.

The Pending Issue of Federal Guarantees

The prospect of energy companies being reimbursed by the US taxpayer has been often mentioned. Nevertheless, concrete details on any guarantee have so far not been forthcoming.

Without certainty is the primary impediment behind the sector's reluctance. Firms seek guarantees against political risk and the possibility that a different government could cancel any agreement.

“You need to be protected from sovereign risk, that we’ve experienced in Venezuela before.”

Therefore, while political confidence runs strong, the financial risks suggest a journey of slow deliberation for any major venture in the country's oil sector.