🔗 Share this article

Industry experts have shown significant doubt regarding bullish statements that American large firms will quickly commit vast sums of dollars to rebuild the country's dilapidated production facilities.

Requirement of Absolute Guarantees

Absent an “iron-clad guarantee” of financial backing from the US federal government, experts believe international firms to proceed with extreme caution.

“It is too early to comment on any upcoming plans,” an official said in response.

The aggressive timeline of under 18 months has been publicly outlined. Yet, expert analyses indicate a longer timeline.

A Probable Schedule

“It is likely going to take 36 months for any significant output increase,” commented an chief investment officer.

He suggested operators would likely spend:

• The first year: Sorting through new regulatory frameworks.
• The second year: Investing in rebuilding of infrastructure.
• The third year: Being able to meaningfully increase yield.

This would lead to an rise of around half a million bpd possibly by the end of the decade.

Interest vs. Appetite for Risk

Experts make a key distinction between firms' attention and their readiness to commit substantially.

“I believe their attention is an high score, on a scale of one to 10. However, their willingness is a four or five, because there is a lack of certainty yet.”

Veteran diplomats in the sector share this view. The expectation is that firms will publicly express enthusiasm while actually moving with deliberate slowness.

The Colossal Cost

The required investment would be colossal. University analysis suggest that adding between half a million and a million bpd would require more than $10 billion in investment over two to three years.

But, rebuilding production to historical levels of around 2.5 million bpd could require a massive $80 billion to $90 billion over six or seven years.

The Pending Issue of Taxpayer Funding

The suggestion of oil giants being compensated by the US taxpayer has been often mentioned. Nevertheless, specific plans on such a mechanism have so far not been provided.

This lack of a solid plan is the key impediment behind the industry's hesitation. Companies seek guarantees against sovereign risk and the chance that a different government could refuse any promise.

“They must be insured against sovereign risk, that we’ve seen in Venezuela already.”

Therefore, while rhetorical promises runs high, the practical realities suggest a path of measured steps for any major venture in the country's energy industry.