NGI The Weekly Gas Market Report / NGI All News Access

Deloitte: E&Ps Willing to Assist in Transition Toward Renewables

U.S. producers are planning to direct more capital spending to drill on the Outer Continental Shelf (OCS) and in onshore natural gas basins, but they are not averse to investing in alternative energy to help the country transition away from fossil fuels, according to Deloitte LLP's annual oil and natural gas industry survey.

Deloitte, working with survey firm Penn, Schoen & Berland Associates, conducted more than 50 telephone interviews in early November with director- and higher-level energy executives whose firms have annual revenues of $100 million or more. The annual survey, released last week, gauged the executives' energy perceptions about what's ahead for their companies and for the nation on issues that ranged from politics to drilling investments.

Questioned about where they would "most likely" increase their capital expenditures (capex), a quarter listed drilling in the OCS, while 21% said they'd be spending more for onshore gas exploration. Another 13% listed drilling in the Arctic National Wildlife Refuge, even though most of it remains closed to exploration. And 12% said "shales and oilsands development" would be their biggest capex draw.

The executives also offered a range of answers on how their companies should invest their income. Surprisingly, only 17% said it was because they wanted to wait before investing in new energy technology. By comparison, 27% said access restrictions limited their ability to invest in productive new reserves, while 23% said the business risks were too high.

"Our sampling of oil and gas executives paints an interesting directional picture -- one that's at odds with the common perception that petroleum companies are reluctant to embrace serious change in how we produce and use energy," said Deloitte's Gary Adams, vice chairman of oil and gas. "In fact, more than half of the executives in our study felt that petroleum companies should work toward helping America transition to the use of more renewables and other alternative fuels."

Oil and gas executives are almost as pessimistic as the general population about the state of energy in the United States. Almost two-thirds said the U.S. "energy situation" is "off on the wrong track," which is about the same percentage as average citizens surveyed nationally around the same time period in early November. However, the energy executives "are significantly more positive when comparing the present energy situation to where it was five years ago," Deloitte noted. "While the general population is convinced that things have gotten worse, oil and gas executives are split -- 44% think the national energy situation is better than five years ago, while 50% think it is worse."

To encourage more U.S. energy investment, executives favored tax breaks the most (37%). Perhaps surprisingly, "opening access to domestic resources that are currently off limits" was the favored choice by only 17%. Investing in infrastructure for promising transportation fuels, such as natural gas and cellulosic ethanol, was chosen as the favorite by 15% of those surveyed.

Another surprise: if more offshore drilling were to be allowed, half thought the "main benefit" would only be to create a "buffer zone" to transition to alternative and renewable energy. Less than a third (27%) said "domestic production will increase dramatically and provide for the promise of greater energy security." Six percent thought more drilling would reduce price volatility; an equal number thought the impact would be negligible.

Energy executives were evenly split as to whether or not the White House should encourage producers to invest more of their profits in alternative energy.

"Three in four executives think transitioning away from reliance on fossil fuels for transportation is an appropriate goal," said Adams. "Interestingly, most (56%) also think that it is an appropriate goal for oil and gas companies."

The survey, he said, "offers a fascinating view into how a group of senior oil and gas professionals feel about the key issues facing the industry. Most notably, half of the respondents we interviewed -- 53% -- believe that the U.S. could run out of reasonably priced oil within the next 25 years, and a similar number -- 56% -- think the world will run out of reasonably priced oil in the next 50 years."

Most of those surveyed don't believe oil and gas will be the cheapest energy sources in the future -- only 23% thought they would be the least expensive fuels in 25 years.

"Clearly," said Adams, "the oil and gas professionals involved in our survey are starting to think about the nation's transition to renewable energy and other alternative fuels." Thirty-seven percent of those surveyed thought renewables would be an affordable energy source in 25 years.

Despite registering a "strong concern" about U.S. foreign energy dependence, 75% said the country would "realistically" achieve energy independence, and most said it would happen in the next 15 years.

"While many of the sampled oil and gas executives (46%) feel renewable fuels are the best alternative when diversifying energy sources overall, most (54%) think the best alternative in transportation fuels is natural gas," the survey found.

The best alternatives to imported oil and gas are renewable energy sources that include solar and wind, said the executives. Only 15% thought domestic oil and natural gas were the "best options" to avoid imported resources.

"However, in terms of transportation fuel alternatives to crude oil derivatives, natural gas is a clear winner (54%)," the survey found. "Almost a third (29%) say it is electricity (plug-in)." Ten percent thought "second generation biofuels," such as cellulosic ethanol and algae, should be used as transportation fuels, and 8% thought it should be "first generation biofuels," such as corn-based ethanol.

"Not surprisingly, oil and gas executives are extremely favorable to their field -- conventional oil and natural gas," the survey noted. "They are also very favorable to renewable energy sources and nuclear," but "for the most part," they do not favor biofuels.

©Copyright 2008 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.

ISSN © 2577-9877 | ISSN © 1532-1266
Comments powered by Disqus