60 pct of oil and gas execs believe: trend of declining reserves irreversible

Oil and Gas Executives say government involvement in supporting the development of renewable energy sources is necessary to alleviate the problem of declining oil reserves, according to the results of a survey conducted by KPMG LLP, the audit, tax and advisory firm.

In the KPMG survey, which polled 553 financial executives from oil and gas companies in April 2007, twenty-five percent of the respondents said that at least 75 percent of government funding into energy should be directed at the renewable sources sector and a further 44 percent said that at least 50 percent of funding should be allocated in the same way. These feelings stem from the overwhelming majority, or 82 percent, citing declining oil reserves as a concern.
“These executives are deeply concerned about declining oil reserves, a situation they see as irreversible and worsening,” said Bill Kimble, National Line of Business Leader, Industrial Markets for KPMG LLP. “They see renewable energy sources as a lifeline but our survey shows that the execs recognize they cannot count on them as a solution in the short-term. Consequently, oil and gas companies are sending a clear signal to the government that intervention is needed.”

While oil and gas executives are keen to see renewable energy sources becoming a mass produced reality, 60 percent say that will not be possible by 2010. Of those that believe it will, 18 percent say ethanol is the most viable for mass production by then, 13 percent say biodiesel and only 3 percent say cellulosic ethanol.

Sixty percent of the executives believe that the trend of declining oil reserves is irreversible. And, when asked about the impact of emerging markets, such as China, will have on declining oil reserves, almost 70 percent of the executives said that it would lead the situation to worsen.

The executives also clearly see that there are steps that individuals can take to alleviate the issue of declining oil reserves.

“One-third of oil and gas executives questioned said that the next time they are purchasing a family car they would consider one that consumes less gasoline, such as a hybrid,” said Kimble. “They clearly see demand-side as part of the solution to declining oil reserves.”

When executives were asked about their upstream capital spending in the 2006 survey, the majority indicated that investment will be a factor in helping them manage declining oil reserves. Sixty-nine percent said that it would increase by more than 10 percent, a jump of 49 percent over 2005. The 2007 survey suggests that increases in spending are flattening, with 35 percent saying they expect and increase of more than 10 percent, 19 percent saying they expect an increase of up to ten percent, and 38 percent say it will stay the same. Only seven percent expect to see a decrease.

Energy Bulletin