Deloitte & Touche LLP analysts foresee continued strength in crude oil prices for more than a year and expect natural gas prices to remain high throughout the winter.
“We won’t see $40/bbl oil again in our lifetimes,” on the New York Mercantile Exchange, Richard S. Woodward, a principal of Deloitte Consulting LLP, told reporters last month at the accounting firm’s annual energy conference in Houston.
Oil futures prices might not drop below $45/bbl on NYMEX for decades, he added, noting that oil and natural gas prices have gone up steadily since 2000 while the US economy has remained strong.
“That’s an extraordinary combination that, frankly, we haven’t seen before,” Woodward said.
“If you can’t get your head around how you’ll get a recession, then the demand for oil is going to grow,” Woodward said. “On the gas side, it’s even more problematic in terms of prices coming down.”
Branko Terzic, Deloitte Services LP’s global and US regulatory policy leader, forecast a “tough winter ahead for consumers” and said “public policy will be put to the test” if the US experiences a cold winter.
Survey
Many US oil and gas investors support industry investment in renewable energy initiatives, said a Deloitte survey. International Consumer Research Inc. randomly surveyed more than 6,000 adults through the US during Sept. 16 through Oct. 23. A total of 503 respondents said they owned oil and gas company stocks.
“It is eye-opening to see the level of support for green energy by individuals who choose to own oil and gas company stocks,” said Greg Aliff, Deloitte & Touche vice-chairman and national managing partner, energy and resources.
“For example, when asked about capital utilization, 39% preferred that the company invest in green alternatives, while only 18% preferred increased dividends,” Aliff said. Meanwhile, 27% said they preferred investments in exploration.
The survey also showed that more than half of oil and gas investors surveyed already invest or plan to invest in companies that are increasing their US oil and gas reserves. Nearly 40% of respondents said companies should invest or increase investment in LNG.
Regarding investment patterns, 54% of those surveyed said they owned stock in a “supermajor,” while 22% said they owned stock in independent producers, and 13% of respondents said they owned stock in both types of companies.
When asked about oil and gas reserves reporting, 82% said they were confident in reserves estimates by the companies in which they invest.
Talent crisis
Deloitte released a report showing that a looming talent shortfall could hinder US companies’ abilities to find and develop oil and gas and to keep up with demand.
“The gap between accelerated growth of upstream companies and available talent to do the work is widening at an alarming rate,” said James R. Sowers, Deloitte director of human capital advisory services.
The report cites an aging upstream workforce, cutbacks and layoffs with industry consolidation and mergers, and the industry’s difficulty in attracting and retaining young employees, particularly geoscientists and engineers.
“We already are seeing some companies turning away exploration and production projects for lack of available employees,” Sowers said. “If left unchanged over the longer term, this trend could significantly impact oil and gas production.”
People born during 1982-93 make up 10% of today’s industry workforce, the study said. In 2002, there were fewer than 292 college graduates in oil and gas majors.
“Upstream companies seem to have an inability to effectively attract that age demographic into this booming industry,” Sowers said. “There is a lot that is unique about the Gen-Y workforce.... Gen-Y needs to be engaged on their terms if we are going to attract and retain the talent that the industry needs.”
The report said the demographic group is attracted by:
• A long-term career development with multiple experiences within a single organization.
• A sense of purpose and meaning in the work.
• Availability and access to mentors and other company champions.
• Work and life flexibility.
• A tech-savvy environment with online problem-solving and learning tools.
• Workplace social networks that embrace open and honest communication. ✦