KPMG’s annual energy survey, which polled more than 100 senior executives in the U.S. representing global energy companies, found that 62 percent of respondents think the U.S. can attain energy independence by 2030, up from 52 percent in last year’s survey. Of the 62 percent, nearly one quarter (23 percent) think energy independence is possible by as soon as 2020. Additionally, the percentage of executives who believe that U.S. energy independence will never happen dropped by 10 percentage points this year, from 27 percent in 2012 to 17 percent in 2013.
“Increased domestic production, particularly from shale assets, is having a profound impact on the global energy sector, introducing new sources to the energy matrix,” said John Kunasek national sector leader for energy and natural resources for KPMG LLP. “This ‘shale gale’ is certainly contributing to the increased optimism among energy executives on the potential for U.S. energy independence and driving large investments into the development and production from these shale assets, including “Greenfield” investment plays.”
Given the potential of shale development, energy executives appear more confident as to relative price stability. Most (73 percent) are bullish that the price of natural gas will remain steady between $3.01 - 4.00 for the remainder of the year. Similarly, 39 percent of respondents expect Brent crude oil will peak at $116-125/bbl in 2013.
“Greater assurance of supply appears to be stabilizing commodity price environments and enabling large investments. At the same time, marginal production remains ‘shut in’ which could quickly be reinstated should the price picture become even more robust for gas,” said Regina Mayor, oil and gas sector leader for KPMG LLP.
Natural Gas and Industry Growth
Seventy-nine percent of executives in the KPMG survey agree that the energy industry’s emphasis in developing environmentally friendly technologies should focus on natural gas, followed by nuclear (39 percent), solar (33 percent), and clean coal technologies (32 percent), indicating a slight shift away from the total bullishness around natural gas seen in the 2012 survey results, to a more balanced view with solar and wind technologies making gains.
Additionally, 62 percent of energy executives indicate the low natural gas environment in the U.S. will lead to resurgence in manufacturing and economic growth. When asked which region of the U.S. will benefit the most from this resurgence, 36 percent of respondents indicate the Northeast, followed by the Midwest (22 percent), Southwest (17 percent) and the South (16 percent).
“Natural gas production, particularly here in the U.S., has drastically shifted the energy paradigm and will be key to the future of the energy industry as exports grow,” Mayor said. “The high production rates of natural gas and its reputation as a low-cost alternative to other energy sources continue to contribute to the recent growth in manufacturing, and as companies begin to monetize these new assets we’ll also see significant benefits for the local and national economies.”
Growth opportunities and barriers for future
Nearly half (47 percent) of energy executives feel the U.S. economy has moderately improved, and their companies’ revenue and U.S. headcount (70 percent and 44 percent, respectively) will continue to steadily grow over the next year.
Additionally, industry executives indicated that their companies will increase capital spending, most frequently citing the areas of geographic expansion (43 percent), followed by expanding facilities (28 percent), the acquisition of a business (24 percent) and information technology (23 percent). Among those who were bullish on geographic expansion, the focus was on expansion within the U.S. (26 percent); high-growth emerging markets outside the U.S. (13 percent); and other developed markets outside the U.S. (5 percent). To achieve these growth aspirations, 25 percent said they would focus on operating process improvement enabled by technology for automation, and 14 percent cited a focus on organic growth opportunities with product development, pricing and geographic expansions.
Despite an overall optimistic outlook, survey respondents most frequently cited regulatory and legislative pressures (47 percent), pricing pressures (26 percent), volatile commodity and input prices (19 percent), and energy prices (19 percent) as the most significant growth barriers facing their companies over the next year. Additionally, 64 percent point to political and regulatory uncertainty, as the biggest threat to their business models.
Investment in Alternative Energy
The 2013 KPMG survey also found that 95 percent of energy executives expect continued R&D investment in alternative energy projects this year. Fifty-five percent anticipate investments will remain unchanged in 2013, however, the percentage of respondents predicting a 10 percent increase in R&D investment nearly tripled, from 11 percent in 2012 to 30 percent in 2013. Additionally, nine percent expect an 11-20 percent increase, and one percent expect investments will jump by 20 percent or more.
When asked which alternative energy sources companies will target most for investment over the next three years, executives most frequently cited shale gas and oil (54 percent), followed by solar energy (29 percent), wind energy (25 percent), biofuels (19 percent) and clean coal technologies (17 percent).
However, executives cited a number of significant challenges to increasing renewable generation on their systems, including the cost of competitive non-renewable energy (50 percent), the cost of a new system (39 percent), and the complexity of renewable project financing and transmission (28 percent).
“What is exciting about these findings it that it demonstrates the industry’s intent to explore all options, despite barriers regarding cost and complexities, to provide a diverse energy matrix to meet the world’s future energy needs,” Kunasek added.
KPMG will host its 11th Annual Global Energy Conference on May 22nd and 23rd at the Royal Sonesta Hotel in Houston. The Global Energy Institute (GEI) provides an open forum where industry financial officers, risk officers, internal audit directors, and tax executives can share knowledge, gain insights, and access thought leadership about key oil and gas or power and utilities issues and emerging trends. Follow KPMG LLP on Twitter at @KPMG_US and join the Energy Conference conversation at #KPMGGEC.
About KPMG LLP
KPMG LLP, the audit, tax and advisory firm (www.kpmg.com/us), is the U.S. member firm of KPMG International Cooperative (“KPMG International”). KPMG International’s member firms have 152,000 professionals, including more than 8,600 partners, in 156 countries.
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