Insiders: U.S. energy independence not reality until 2030 (if ever)

HOUSTON — Many energy executives expect the price-per-barrel of Brent crude oil to peak this year at levels significantly higher than current levels of $112 /bbl.

In fact, 43 percent predict oil prices to exceed $141 per barrel, according to the results of the 10th annual energy executive survey conducted by the KPMG Global Energy Institute.

More than two-thirds of the respondents to KPMG’s survey say U.S. energy independence is not attainable until at least 2030, despite the increased focus on domestic energy sources, energy infrastructure, and alternative energy sources such as Shale.

Price predictions

In this year’s KPMG energy survey, which polled 225 financial executives from global energy companies in late-April 2012, 25 percent think 2012 Brent crude oil prices will peak between $131 and $140 per barrel.

Almost half of executives see even higher prices, with 27 percent predicting a peak between $141 and $150; 9 percent predicting $151 and $160; and 6 percent between $161 and $180.

One-third think Brent crude prices peaked earlier this year when it was hovering in the mid-$120 range — predicting between $121 and $130 per barrel as a high for 2012.

“Our survey findings confirm that we may not have seen peak levels on crude yet,” said John Kunasek, national leader of the KPMG U.S. energy practice, and executive director for the KPMG Global Energy Institute.

Need energy policy

“Energy leaders tells us continued volatility will be driven by underlying issues such as economic uncertainty, geopolitical risk, rising operational costs and regulatory concerns.

“In fact, 40 percent of executives say the single most important energy issue facing the United States is the need for a sound and long-term energy policy.”

Independence. This perceived lack of a national energy policy could be a driver to executives’ thoughts on the reality of U.S. energy independence.

When asked when they think the United States can attain energy independence, 27 percent say never, 21 percent say 2040 or beyond, and 18 percent say by 2030. Interestingly, 12 percent deem it possible by 2020 while the remaining 22 percent think by 2025.

The Shale gale

The majority of executives in the KPMG survey agree that the development of shale oil and gas reserves will have a significant effect on global energy needs over the next three years.

In addition, nearly half (49 percent) believe shale, which accounted for only 20 percent of total natural gas production in 2010, will become the U.S.’s dominant source for natural gas by 2020. Another 22 percent believe shale will be the primary source for natural gas by 2025.

“Companies will continue to invest heavily in shale assets, as the industry has only just scratched the surface in the development and resulting production resulting from these assets.,” said Regina Mayor, oil and gas sector leader for KPMG U.S.

Seventy-eight percent of executives believe the industry’s emphasis in developing environmentally friendly technologies should be focused on natural gas. As such, shale gas/oil (61 percent) was most frequently cited by executives as the alternative energy source that will win the most significant R&D investment over the next three years — up from 44 percent who selected shale in KPMG’s 2011 survey.

Interestingly, executives surveyed admit that the environmental concerns around fracking, may eventually have an upward pressure on natural gas prices.

Alternative energy

Global investment in renewable energy projects in 2011 exceeded investment in fossil fuel power projects for the first time.

However, despite the bullish outlook for shale projects, KPMG’s 2012 survey found that only 19 percent of executives expect R&D investment in alternative energy sources to increase this year — down from 35 percent who predicted an increase in last year’s survey.

Additionally, 61 percent of executives believe renewable energy investment will begin to decline as governmental subsidy programs become harder to reconcile with budget shortfalls, and as other cheaper energy sources such as shale gas become more prevalent.

“This data does not mark the beginning of declining investment in renewables,” said Kunasek. “It suggests that executives are fully aware of the ramifications of the upcoming U.S. presidential election, and also the understanding that 2011 saw historic investment levels in assets that must now be developed and monetized.

“We will still see significant investment from the industry going forward, but perhaps at flat levels.”

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