According to the results from the 12th Annual Energy Industry Outlook Survey from KPMG Global Energy Institute, more and more energy executives believe that the US can attain energy independence within the next 15 years, eliminating the US dependency for foreign energy sources.
The survey polled over 100 senior executives in the US representing global energy companies, found that approximately 73% of energy executives believe the US can attain energy independence by 2030, or sooner. This figure is up by 10% from the 2013 survey. Of the 73%, 17% believe the US could fully meet current energy demand with only US based sources by 2020.
In addition to the continued development of conventional and unconventional domestic energy reserves, the survey found that 37% of executives cite the development of energy transportation infrastructure such as pipelines and transmission lines as the most important action they think the US should take to achieve energy independence. 23% said greater use of renewable energy sources and 20% point to greater use of alternative fuels for transportation, including natural gas, electricity and biodiesel.
Focus on growth
The 2014 survey found that more than 50% of the responders indicated that they will focus on driving accelerated growth in the next 3 – 5 years. To help drive accelerated growth, 54% of executives said dedicated leadership focused on executive hyper growth plans would help whilst 48% said they would look to strategic planning processes and 46% cited significant funds allocated to mergers and acquisitions.
The survey found that a further 30% of executives plan to increase spending the most over the next year on business model transformation, followed by employee compensation and training, expanding facilities, and geographic expansion within the US.
The findings revealed that the number of executives expecting to be involved in a merger or acquisition was a buyer over the next year almost doubled from 2013. 65% of respondents said they feel very likely or somewhat likely to acquire stakes in one or more companies over the next three years. This is compared to the 2013 results in which 11% felt very likely to be a buyer and 22% felt somewhat likely. Consolidation of core businesses and competition along with customer growth and geographic growth were cited by respondents as the primary drivers behind acquisition for 2014.
In other findings, 70% of the executives expect the US economy will significantly or moderately improve over the next year which is a 29% increase on 2013. 55% of executives expect US headcount to decrease by 1 – 10%, which is a 17% increase on 2013.
It appears, from the survey results, that energy executives appear confident that oil and gas pricing will remain relatively stable this year. 25% of respondents are bullish that the average price of natural gas will fall in the range of US$ 3 – 3.75, while 47% say US$ 3.76 – 4.50. An additional 44% of respondents said they expect the average price of Brent Crude oil for 2014 to fall in the SU$ 106 – 111 range, with 38% expecting US$ 100 – 105 range. 6% expected US$ 99 or lower.
Barriers to growth
Despite the overall optimism in the outlook from survey respondents, energy prices, regulatory environment, impact of new regulations/legislation and cyber threats were said to be the greatest issues posing threats to business models.
Also, when asked about the most significant growth barriers facing companies over the next 12 months, responding executives said energy prices, increased taxation and regulatory and legislative pressures were top on the list.
John Kunasek, national sector leader for energy and natural resources, KPMG, LLP said ‘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, oilsands, and shale assets. These developments are contributing to a significant transformation of the energy industry, adding to the increased optimism among energy executives on the potential for US energy independence and the overall future of the energy industry.’
Kunasek continued, ‘today’s environment is driving the need to improve performance and consolidate core businesses through increased mergers and acquisitions, streamlined operations and emerging technologies. Our clients indicate that access to technology and portfolio optimisation will be instrumental in driving M&A activity in the coming year.’
Kunasek concluded, ‘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. What is exciting to see, however, is despite these concerns, energy executives are positioned for future growth of both their own organisations and the energy industry as a whole.’
Regina Mayor, advisory industry leader for energy and natural resources, KPMG LLP said, ‘there are tremendous opportunities for growth, but the uncertainty around how to drive growth in this environment remains a major concern for executives. Companies that are more agile and responsive in updating their business models will be better positioned to translate current marketplace pressures into competitive advantages.’
Mayor continued, ‘natural gas production in the US, and its reputation as a low cost alternative to other energy sources, is shifting the future of the energy industry. Additionally, shale is quickly shifting from the next big thing to an essential part of the global energy sector, and while the US is still ahead in terms of commercialising this valuable asset, a series of discoveries and technological advances is opening up the playing field to new markets around the globe.’
Adapted from press release by Claira Lloyd
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