According to a new Deloitte survey titled ‘2014 Oil & Gas Survey: The Next Chapter of the Energy Renaissance’, America today has enough affordable natural gas production to meet rising and changing sources of demand, and the US will be self sufficient in oil in 5 – 10 years.
Compared with the Deloitte 2012 Oil & Gas Survey, there has been a 150% increase in the number of respondents who think the US is or will be self sufficient in oil within the next five years (20%). The vast majority (90%) believe the US now has enough affordable domestic natural gas production to meet rising and changing sources of demand. The rosy production outlook may have contributed to a general sense of industry optimism, with 80% of respondents believing the US energy situation has improved versus five years ago and is headed in the right direction.
It is noteworthy that the survey was conducted in late October, prior to the nearly 15% decline in crude prices, Republican sweep of the midterm elections and ban on hydraulic fracturing within the city limits of Denton, Texas.
John England, vice chairman and US Oil & Gas leader for Deloitte LLP, commented: “The recent shake ups in prices, politics and regulations provide a compelling backdrop to evaluate the responses provided in the survey; as the industry tests the waters with respect to shale’s resilience during a cycle of low prices, only 15% of respondents at the time expressed that they were very or extremely concerned about a possible price collapse.
“The industry is watching politics and prices closely especially when it comes to exports – an issue seen as crucial for continued success, with 83% of respondents indicating that exports are important for the long term viability of unconventional oil and gas production in the US”.
Additional concerns weighing on the minds of industry executives were related to costs. Those who believed oil and gas capital spending would rise remained fairly constant with more than half (56%) expecting more capital pending in 2015. Expectations for mergers and acquisitions showed that half of the respondents expect an increase in M&A activity over the next year. As it pertains to downstream, over 80% of the respondents believe that profitability will strengthen or remain the same even as the industry continues to deliver very strong results. These responses related to downstream profitability and M&A activity will likely have become even more optimistic since the survey was conducted, in light of the price decline.
“The survey revealed continued positive momentum regarding the optimization of US shale. Shale development remains the lynchpin of the North American Energy Renaissance, and improving extraction technologies and methods as well as improved midstream infrastructure are fueling the growth of production”.
66% of respondents believe that technological advancements in shale extraction have improved the economics of shale. Nearly half (44%) point to the smaller environmental footprint of shale as a significant improvement, while 39% believe fresh water recycling has improved.
Despite growing optimism over shale innovation, potential federal regulations was the greatest concern among respondents (65%) – nearly double the next greatest concern, cost margins (38%). In fact, 48% of respondents were very or extremely concerned about new EPA regulations that could negatively impact the economic of shale, and this concern may continue to grow in a low price environment. The response indicate that regulations once established and known by the industry can be easily incorporated into standard operating procedures, however regulatory uncertainty can interfere with the ability of industry to plan and can potentially prevent new projects from moving forward.
England said: “The impact of the midterm elections on slowing down potential federal regulations and acceleration of major infrastructure projects is still unclear. At the surface, Republican control of the legislative agenda would appear to amplify the sense of industry optimism, but there remain ample opportunities for continued gridlock since GOP’s margin of victory in the Senate does not leave them with a large enough majority to avert the threat of a Democratic filibuster that can keep legislation in procedural limbo”.
Deloitte conducted the survey in late October and canvassed more than 250 oil and gas professionals from a decision making demographic: respondents were 48 years oil on average and had an average of 20 years’ experience in the industry.
Adapted from a press release by Emma McAleavey.
Read the article online at: https://www.hydrocarbonengineering.com/refining/18112014/deloitte-oil-and-gas-survey-1640/