Government support to develop renewable energy sources is paramount to overcome an irreversible decline in oil and natural gas reserves, according to a survey of energy executives by KPMG LLP.

The auditing firm polled 553 financial executives from oil and gas companies in April. Of those responding, a quarter said at least 75% of government funding into energy should be directed at the renewable sources sector; 44% said that at least half of the funding should be allocated in the same way. An overwhelming majority, or 82%, cited declining reserves as a concern.

"These executives are deeply concerned about declining oil reserves, a situation they see as irreversible and worsening," said KPMG's Bill Kimble, National Line of Business Leader, Industrial Markets. "They see renewable energy sources as a lifeline but our survey shows that the execs recognize they cannot count on them as a solution in the short-term. Consequently, oil and gas companies are sending a clear signal to the government that intervention is needed."

While oil and gas executives are keen to see renewable energy sources becoming a mass-produced reality, 60% do not think it will be possible by 2010. Of those executives who think it is possible, 18% believe ethanol is the most viable for mass production by 2010, with 13% expecting it to be biodiesel, and 3% expect it to be cellulosic ethanol.

More than half -- 60% -- believe that the trend of declining reserves is irreversible, the survey found. When asked about the impact of emerging markets such as China on reserves, nearly 70% said the situation will worsen.

The executives also "clearly" see that there are steps that individuals may take to alleviate declining reserves.

"One-third of oil and gas executives questioned said that the next time they are purchasing a family car they would consider one that consumes less gasoline, such as a hybrid," said Kimble. "They clearly see demand-side as part of the solution to declining oil reserves."

The survey also questioned executives about upstream spending. Unlike the 2006 survey, when a majority said more investments would help manage declining reserves, the latest survey suggests that increases in spending are flattening. About one-third, 35%, expect to increase spending more than 10%, while 19% expect an increase of up to 10%, and 39% predicting flat spending this year. About 7% expect to decrease their upstream spending.

Mergers and acquisitions continue to be on executives' minds, with about a quarter expecting their company to be involved in one in the next year -- a 3% increase over last year's survey. Of those surveyed, 68% said private equity will play a larger role in mergers this year than in previous years.

According to KPMG, the respondents put a "great deal of their focus" on the risks facing their companies. Forty-four percent said the biggest risk facing their company at this time is financial, including regulatory requirements and shareholder demands. About 9% cited "political unrest in certain countries in which our company has operations" and another 9% said it was "insufficient access to drilling rigs."

When asked about global warming, 65% said it is a natural weather cycle; 11% do not believe it is occurring. About a quarter of the respondents said carbon dioxide-included global warming is occurring.

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