The United States will achieve energy independence within the next 15 years and possibly as soon as 2020, senior global energy executives said in a new survey by KPMG Global Energy Institute.
The 12th annual industry outlook by KPMG found that close to three-quarters (73%) of 100-plus executives questioned believe the United States will attain energy independence by 2030 or sooner, up 10% from last year's outlook. Of the 73%, 17% said they believed the United States could meet current energy demand with only domestic-based resources as soon as 2020.
"Technology continues to offer the promise of a greener, safer, cheaper and more reliable energy future. Exciting new breakthroughs are leading to a whole new generation of domestic oil and gas production, particularly from deepwater, oil sands, and shale assets," said John Kunasek, national sector leader for energy and natural resources for KPMG LLP. "These developments are contributing to a significant transformation of the energy industry, adding to the increased optimism among energy executives on the potential for U.S. energy independence and the overall future of the energy industry."
Natural gas is the biggest driver, according to executives.
"Natural gas production in the U.S., and its reputation as a low-cost alternative to other energy sources is shifting the future of the energy industry," said KPMG's Regina Mayor, advisory industry leader for energy and natural resources. "Additionally, shale is quickly shifting from 'the next big thing' to an essential part of the global energy sector, and while the U.S. is still ahead in terms of commercializing this valuable asset, a series of discoveries and technological advances is opening up the playing field to new markets around the globe."
In addition to continued development of conventional and unconventional domestic energy reserves, more than one-third (37%) of executives cited energy transportation and midstream infrastructure development as the most important action they believe the country should take to attain energy independence. Twenty-three percent cited more use of renewable energy sources and 20% pointed to increased use of alternative fuels for transportation, including natural gas, electricity and biodiesel.
Most were confident that oil and natural gas pricing will remain relatively stable this year. Close to half (47%) think natural gas prices will average $3.76-4.50, while about one-quarter put the number at between $3.00 and $3.75/Mcf. The average price of Brent crude oil this year is expected to be $106-111/bbl, according to 44%, with about 38% forecasting a price of $100-105; 6% believe it will be $99/bbl or below.
The survey also found that more than half of respondents plan to focus on driving accelerated growth in the next three to five years. Fifty-four percent cited dedicated leadership focused on executing hyper-growth plans, 48% cited strategic planning processes (including multi-year plans), and 46% indicated significant funds allocated to mergers and acquisitions.
About one-third (30%) of the executives said their companies would increase spending the most over the next year on business model transformation, followed by employee compensation/training (29%), expanding facilities (25%) and geographic expansion within the United States (25%).
"There are tremendous opportunities for growth, but the uncertainty around how to drive growth in this environment remains a major concern for executives," said Mayor. "Companies that are more agile and responsive in updating their business models will be better positioned to translate current marketplace pressures into competitive advantages."
The number of executives expecting to be involved in a merger/acquisition (M&A) as a buyer in the next year almost doubled from 2013 sentiment. About 31% felt "very likely" and 24% said it was "somewhat likely" that a deal would be done over the next three years. In 2013, 11% thought it "very likely" and 22% said it was "somewhat likely."
"Today's environment is driving the need to improve performance and consolidate core businesses through increased mergers and acquisitions, streamlined operations and emerging technologies," Kunasek said. "Our clients indicate that access to technology and portfolio optimization will be instrumental in driving M&A activity in the coming year."
Those surveyed most frequently cited energy prices (40%), regulatory environment (31%), impact of regulations/legislation (32%) and cyber threats (23%) as the biggest barriers to their business models. The most significant growth barriers facing companies over the next year were energy prices (38%), increased taxation (34%) and regulatory and legislative pressures (29%).
"Energy companies are operating in a dynamic and exciting environment, but regulation uncertainties and vulnerability around evolving cyber threats raise genuine concerns for industry executives," said Kunasek. "What is exciting to see, however, is despite these concerns, energy executives are positioned for future growth of both their own organizations and the energy industry as a whole."