HOUSTON, Dec. 5, 2001 Energy industry executives foresee economic recovery and lower energy prices, but have a high concern for the security of oil and natural gas supplies, according to a survey conducted at Andersen's 22nd Annual Energy Symposium in Houston.
"Most oil and gas and electric power company executives believe we are entering a new world of energy where industry fundamentals and structures are changing," said Victor Burk, managing partner of Andersen's Energy & Utility Practice. "Over the next three years, industry and consumers can expect lower but more volatile prices, increased consolidation and restructuring among companies, higher industry spending to find and deliver energy and a significant impact from new technologies."
Major survey findings include:
* More than 60% agreed that global oil demand growth over the next three years will exceed the 1.2% average from 1990 to 2000. Also, 74% said global gas demand growth will exceed the 2% average from 1990 to 2000. "This implies an expectation that economies in many countries will recover from the current recession relatively early in the next three year period, with a resulting increase in demand growth," Burk said.
* Nine out of 10 respondents expressed increased security concerns related to oil supplies. Similar surveys conducted by Andersen in mid-October in London and Buenos Aires have produced almost the same results. "We can probably associate these security concerns with worries about spreading tension in the Middle East, with talk of potential action against Iraq, and with the growing conflict between Israel and the Palestinians," Burk observed.
* Only a small minority 17% believes the average price of oil over the coming three years will exceed the year-to-date averages for WTI of $26.64 per barrel, and for Brent of $24.98 per barrel. And 60% believe oil price volatility will increase beyond 2001 levels.
* A majority of respondents 58% believe global capital spending for exploration and development will increase in the next three years beyond 1999 to 2001 levels. And 79% believe E&D capital spending outside North America will grow faster than inside North America.
* At the same time, only 39% believe capital will be more available in the coming three years than during 2001.
Burk observed that the rationale supporting higher capital spending in a period of increased security concerns, lower oil prices, higher price volatility and lower capital availability may be confidence in technology. "Eighty percent of survey respondents believe technology advances will deliver improved success and lower costs," he said.
Symposium attendees also predicted by a large margin (79%) that there would not be a repeat of the California electric power crisis in other liberalized markets, that wholesale electric power price increases will lag behind the rate of inflation, that there will not be a resurgence in nuclear power generation, and that the trend toward unbundling vertically integrated utilities will accelerate.
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