KPMG survey finds majority of energy execs see oil over $121/barrel this year; shale expected to have transformative impact, investment in alternatives increasing
Energy executives expect continued volatility in the price-per-barrel of oil for the remainder of the year, with 64% predicting crude prices to exceed $121 per barrel. The executives also foresee shale oil and gas having a transformative effect on helping to meet the world’s energy needs, according to the results of the 9th Annual Energy Survey conducted by the KPMG Global Energy Institute.
In this year’s KPMG energy survey, which polled 550 financial executives from global energy companies in April 2011, 32% think 2011 US crude oil prices will peak between $121 and $130 per barrel. One-third of executives see even higher prices, with 17% of those predicting between $131 and $140 per barrel; 9% between $141 and $150; and 6% expecting crude prices to exceed $151 per barrel before year end.
Only 35% think current crude prices are near the high they expect for oil this year, predicting the peak will be between $111 and $120 per barrel.
While we have seen some very recent declines due to selloffs, these variations reflect persistent instability, and our survey findings confirm that we may have not seen peak levels on crude. Energy leaders tell us continued volatility will be driven by underlying issues such as regulation, geopolitical concerns and supply disruptions, as well as escalating energy demand. But the good news is that energy executives tell us they are significantly increasing investment in a range of alternative energy sources and see shale factoring strongly into meeting the world’s future energy needs.—John Kunasek, national leader of the KPMG US energy practice, and executive director for the KPMG Global Energy Institute
35% of the executives surveyed said their company would increase R&D investment in alternative energy projects in 2011, up considerably from 15% in KPMG’s 2010 survey.
Alternative energy sources. Shale gas/oil was most frequently cited (44%) by executives as the alternative energy source that will win the most significant investment, with nearly two-thirds (62%) expecting shale oil and/or gas to continue to have a transformative impact on meeting the world’s energy needs.
Executives also cited solar (31%), wind (25%), advanced, cleaner coal technologies (17%), biodiesel (10%), and chemically stored electricity (batteries and fuel cells) (8%) as alternative energy sources that would see increased R&D investment.
What is exciting about these findings is that it demonstrates the industry's intent to explore all options. Previously, the executives have pointed to wind and solar as the main investment choices, but this year we have seen a shift. Increased production of shale gas in North America could have profound implications on the global energy sector. Even batteries and fuel cells have entered the conversation.—John Kunasek
Higher capital spending. In addition to investment in alternative energy, executives surveyed by KPMG say their companies will increase investment in their businesses, predicting capital spending to increase in 2011 compared to 2010. 33% of executives expect capital spending to rise by more than 10% over last year’s levels; 17% project an increase between 5–10%; and an additional 17% forecast an increase of up to 5%. 69% anticipate operating costs will go up over the next 12 months as well.
A significant portion of the additional capital spending could be allocated to increasing human resources, as many of the executives (49%) expect their company’s workforce to expand over the next 12 months: up two percentage points from KPMG’s 2010 survey. One-quarter expect the workforce to increase up to 5%; 13% see increases between 5–10%; and 11% think their company will expand the workforce by more than 10%.
Offshore exploration and production. Despite the amount of attention the measures received, 68% of executives surveyed by KPMG say the regulatory restrictions resulting from the Gulf of Mexico incident have had no impact on their companies’ offshore exploration and production efforts. However, 12% said their companies have increased emphasis on nontraditional explorations such as shale, and 10% have increased onshore drilling.
8% say they have shut down US rigs and moved to other geographies; and another 8% say regulatory restrictions will have little impact on long-term development of offshore reserves but have improved exacting drilling practices.
KPMG will host its Annual Global Energy Conference on 25–26 May at the Intercontinental Hotel in Houston.