Deloitte released a survey at its Oil & Gas Conference in Houston on December 9 that shows the views of oil and gas professionals regarding the future of natural gas. According to Deloitte, the US is entering an age of plenty for natural gas. Gary Adams, vice chairman and leader of Deloitte’s oil and gas practice, called the survey numbers “striking,” noting that 84% of the survey respondents say the best days for the US natural gas industry are still ahead. In a press release, Deloitte said current industry thinking would attribute this enthusiasm about natural gas to a surge in production from unconventional formations, such as shale and coal bed methane, and to the expectation that climate change legislation will increase the demand for gas-powered electricity generation. In fact, according to Adams, the survey confirms the increasingly common perception among many energy pundits that America’s energy future will become more closely aligned with natural gas than seemed to be the case just a few years ago. In contrast, oil will continue to be a dominant fuel source for transportation for many years to come, but difficulties are expected to continue when it comes to finding and producing the fuel in the future, mainly because oil is increasingly found in challenging environments such as deep water and arctic regions, or in reserves controlled by national oil interests. “While most analysts agree that oil will remain vital for transportation, the current belief in a vibrant future for domestic natural gas – driven by significant technological advances in the production of gases from unconventional fuel sources – stands in contrast to the industry’s thinking just a few years ago, which indicated that natural gas supplies in the United States would not grow dramatically,” Adams said. Deloitte says additional key perceptions that surfaced in the survey further support this optimism: • While oil is expected to remain the single most widely used energy source in the US for some time, its usage is expected to decline over time. The number of respondents that expect oil to remain the most widely used overall energy source in the US drops 16 points over the next five years — sinking to 41% who believe oil will dominate in 2015 from the 57% who currently think oil is the most widely used overall energy source. • In contrast, expectations that natural gas will be the most widely used fuel source by 2015 double over the next five years, rising to almost one quarter of participants who believe it will dominate in 2015. One in 10 respondents sees natural gas as the currently dominant fuel source. • Almost one in 10 respondents expects unconventional natural gas to be the main source of energy in five years – an additional 4% think it will be LNG. • When it comes to fossil fuel production, 85% of respondents believe domestic gas production will increase in the next five years, while only 45% who think American oil production will increase during the same time period. • More respondents believe oil prices will increase than those who believe natural gas prices will increase. More than half (51%) believe the price of oil will greatly increase over the next five years. In contrast, only 32% of respondents foresee the price of natural gas greatly increasing in the same time period. The survey also addressed attitudes about climate change legislation. The survey revealed that 60% of respondents think some form of the climate change legislation currently under discussion in Congress will be finalized and passed within the next two years. Only 14% think Congress will never pass climate change legislation. Respondents were united, however, in their opinions that this sort of legislation will push consumer prices higher and penalize oil and gas companies: • More than 90% of respondents believe climate change legislation will lead to higher gasoline and natural gas prices for consumers. • Three quarters of the respondents expect climate change legislation will lead to significantly lower profits for oil and gas companies, and 68% say it will lead to more layoffs in the industry. • Most oil and gas professionals (76 percent) believe climate change legislation is not likely to create more jobs for Americans. “All of this speaks to a general concern about the effectiveness of governmental energy policies among oil and gas professionals,” Adams said. The survey indicates that 76% think the energy industry is heading in the wrong direction and a similar number, 63%, say it is in worse shape now than it was even a year ago.” Despite concerns about layoffs and expense cutting, respondents are optimistic about exploration and production revenues. Almost one in two oil and gas professionals expects layoffs will increase over the next year. Most say their companies are reducing operating expenses, and many say their companies are reducing overall capital expenditures in response to the recession. Furthermore, respondents do not expect revenues to shrink in the various oil and gas industry sectors in the next year, with the exception of the refining sector: • 76% expect revenues to grow at national oil companies • 76% expect revenues to grow at international oil companies • 67% expect revenues to grow at independent exploration and production companies • 61% expect revenues to grow at supply and service companies • 58% expect revenues to grow at outside energy consultancies • 35% expect revenues to grow at refining companies
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