The golden age of natural gas is coming, says survey

natural_gas_fire (Gattonelblu/Flickr)

The North American natural gas industry has its best days ahead, according to a survey of the industry taken by consulting and accounting giant Deloitte, but many expect more layoffs in the coming year and more cost cutting.

The surge in natural gas production from the plentiful shale and coal bed methane formations, combined with an expectation that climate change legislation will increase the demand for natural gas-fired power generation, has “the overwhelming majority” of the oil and gas executives surveyed, “84 percent, say the best days for the natural gas industry are still ahead of us, despite today’s low prices,” says Gary Adams, vice chairman and leader of Deloitte’s oil and gas practice.
The survey, released today at Deloitte’s annual Oil & Gas conference in The Woodlands, was compiled through 200 interviews with oil and gas professionals this fall who “have worked in the industry for at least five years, are college educated and earned at least $100,000 per year.”
Many of the results seem to simply reinforce conventional wisdom — i.e. 85 percent believe domestic natural gas production will increase in the next five years, and 90 percent believe climate change legislation will lead to higher gasoline and natural gas prices.
But other data points are a bit more interesting. For example:

• On layoffs 44 percent expect that layoffs in the industry will increase over the next year.

• 75 percent say their companies are reducing operating expenses and 56 percent say their companies are reducing overall capital expenditures.

Despite those dark clouds many believe revenues will not shrink in the next year:

• 76 percent expect revenues to grow at national oil companies and international oil companies

• 67 percent expect revenues to grow at independent E&Ps

• 61 percent expect revenues to grow at supply and service companies

• 58 percent expect revenues to grow at outside energy consultancies

• But only 35 percent expect revenues to grow at refining companies

And contrary to analysts predicting a wave of mergers and acquisitions, most oil and gas professionals — 86 percent — say they don’t see their own company going down that road.
“What we are seeing here is an underlying confidence in the sustainability of the oil and gas industry,” said Adams. “Oil and gas companies have survived severe volatility over the past decades, and despite the current recession, these companies have sophisticated, adaptable business models and believe they can post healthy revenues well into the future.”

The survey can be found below:

Deloitte Survey — Full Results — Age of Plenty for Natural Gas — 12.9.09