Survey: oil execs serious about Peak Oil, but mass-produced biofuels years away

A poll by audit, tax and advisory firm KPMG questioning 553 financial executives from oil and gas companies on the future of oil and biofuels, was recently released. The survey gives a snapshot of oil execs' attitudes to global warming, Peak Oil and the potential of renewable fuels. The fact that a majority of them considers climate change to be a 'natural weather cycle' is highly significant: it shows the oil industry will go against the scientific consensus in order to maintain its power position in the energy matrix of our world.

Peak Oil is real
Twenty-five percent of the respondents said that at least 75 percent of government funding into energy should be directed at the renewable fuels 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. Oil and gas companies are sending a clear signal to the government that intervention is needed." - Bill Kimble, National Line of Business Leader, Industrial Markets for KPMG LLP.

Sixty percent of the executives said they believe 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.

Biofuels: 'not yet'
However, more than half of the five hundred plus oil and gas executives said they didn't think 'mass production' of renewable fuels would happen in the near future.

While the petroleum company leaders said they're keen to see renewable energy sources becoming a mass produced reality, 60 percent said it will not be possible by 2010. Of those that believe it will, 18 percent identified ethanol is the most viable for mass production by then, 13 percent said biodiesel and only 3 percent said cellulosic ethanol.

Bill Kimble stressed the survey was not qualitative, only quantitative, so survey leaders didn't have a chance to probe responses in detail. But he speculated the findings reflected two big big issues regarding alternative fuels.

"What is the definition of mass production? Ethanol is a very small, small percentage of fuel production today. And secondly, what's embedded in here is the economics. Without incentives from the government, I don't think people are that positive on it until we get it right," he said. On the other hand, the Brazilian case shows that within a single country where conditions are favorable (climate, crops, land), 'mass production' of biofuels is not unfeasible.

Climate change
An amazing majority of 65 percent of the respondents said that they believe global warming is occurring, but they called it a 'natural weather cycle'. Eleven percent said that they do not believe it is occurring. Just under a quarter said they believed global warming was CO2-induced:
bioenergy :: energy :: sustainability :: reserves :: oil :: gas :: biofuels :: climate change :: Peak Oil ::

Managing declining oil reserves
When asked about their upstream capital spending, 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 reserve opportunities are tougher, so what are you going to do? You could invest in technology, or start playing more in the alternative energy space," said Kimble.

Mergers and acquisitions continue to be a trend, with 24 percent of the executives saying that they expect their company to be involved in one in the next year. Sixty eight percent of respondents expect private equity to play a larger role over the next year than it has in previous years.

Risks in the industry
Responding to perceived risks facing their companies, KPMG's Kimble told Inside Greentech it was a "jaw-dropper" that forty-four percent identified their biggest risks as financial, specifically issues like satisfying regulatory requirements like Sarbanes-Oxley, shareholder demands and corporate social responsibility requirements.

"We put in things like access to access to drilling rigs, political unrest in foreign countries, like the west coast of Africa, environmental damage, plants having problems, access to equipment," said Kimble. "None of those emerged as big factors."

"Corporate social responsibility seemed important. They've got to get that right. That could have an impact on the market value of a company."

Image: Peak Oil scenario by the Association for the study of Peak Oil and Gas.

More information:
Inside Greentech: Oil and gas execs say biofuel mass production years away - May 11, 2007.