Low natural gas prices may be driving numerous producers to shift their focus to oil production; however, results from a recent executive survey released last week suggest that the country's energy future will be more closely linked with natural gas than was previously thought.
According to 84% of respondents to a survey of oil and gas professionals conducted by the Deloitte Center for Energy Solutions, "the best days for the natural gas industry are still ahead of us, despite today's low prices," said Gary Adams, leader of Deloitte's oil and gas practice.
Industry thinking attributes the enthusiasm about gas to a surge in production from unconventional formations, such as shale and coalbed methane, and to the expectation that climate change legislation will increase the demand for gas-powered electricity generation.
The survey confirms "the increasingly common perception among many energy pundits" that the country's energy future will be more closely aligned with natural gas than thought previously, Deloitte said.
In contrast, oil will continue to be a dominant fuel source for transportation for many years to come, but difficulties are expected to continue when it comes to finding and producing the fuel in the future, mainly because oil is increasingly found in challenging environments such as deepwater and arctic regions, or in reserves controlled by national oil interests, Deloitte noted.
According to the survey:
Respondents were in accord regarding climate change legislation, anticipating that some form of the legislation would pass within two years. However, they said they expected it would penalize oil and gas companies, and increase fuel prices for consumers. "According to our survey," said Adams, "a solid majority of respondents, 60%, think that some form of the climate change legislation currently under discussion in Congress will be finalized and passed within the next two years. A mere 14% think Congress will never pass such legislation."
While oil and gas professionals are split on whether climate change legislation will reduce greenhouse gas emissions, they are united in their opinions that it will push consumer prices higher and penalize oil and gas companies:
"All of this speaks to a general concern about the effectiveness of governmental energy policies among oil and gas professionals," said Adams. "The survey reveals that most oil and gas professionals, 76%, think the energy industry is heading in the wrong direction and a similar amount, 63%, say it is in worse shape now than it was even a year ago."
When the Deloitte survey looked at recession-related business issues, it found that concerns about layoffs and expense cutting persisted among oil and gas professionals:
Contrary to speculation by many analysts about mergers and acquisitions in the energy sector, most of the survey respondents do not see such activity at their own companies. When asked how their individual companies are responding to current oil and gas prices, only 14% said their company is pursuing a merger or acquisition.
"What we are seeing here is an underlying confidence in the sustainability of the oil and gas industry," said Adams. "Oil and gas companies have survived severe volatility over the past decades, and despite the current recession, these companies have sophisticated, adaptable business models and believe they can post healthy revenues well into the future."
Survey respondents were more or less evenly split on whether the United States can achieve energy independence, with 53% saying the United States can achieve independence while 46% saying it cannot.
Deloitte conducted 200 interviews among oil and gas professionals from Oct. 30 to Nov. 5. All respondents have worked in the industry for at least five years, are college educated and earned at least $100,000 per year.
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.