Energy execs: Crude prices likely to climb much higher

A majority of energy industry executives believe crude will peak at more than $120 this year, with more than one third guessing prices will top $140, according to a survey by KPMG.

The annual energy survey, which in April polled 550 financial executives from global energy companies, found that 35 percent of the respondents think crude will peak between $111 and $120 per barrel in 2011.

Another 32 percent think the price will peak between $121 and $130 per barrel. Seventeen percent predict between $131 and $140 per barrel, 9 percent between $141 and $150, and 6 percent predict more than $151 per barrel.

Oil, which has been above $100 per barrel recently, closed up 76 cents on Thursday at $98.97.

“While we have seen some very recent declines due to selloffs, these variations reflect persistent instability, and our survey findings confirm that we may have not seen peak levels on crude,” said John Kunasek, head of KPMG U.S.’s energy practice and executive director for the KPMG Global Energy Institute.

“Energy leaders tell us continued volatility will be driven by underlying issues such as regulation, geopolitical concerns and supply disruptions, as well as escalating energy demand,” Kunasek said.

In the survey, 35 percent of the executives said their R&D spending on alternative energy would increase this year (up from 15 percent in the 2010 survey), but the definition of “alternative energy” in this context includes shale oil and gas. Forty-four  percent of the execs said they’d be spending more on unconventional oil and gas.

Other areas where executives said they expect to see more R&D spending this year (they can vote for more than one, BTW):

  • Solar: 31 percent
  • Wind: 25 percent
  • Clean-coal technology: 17 percent
  • Biodiesel: 10 percent
  • Batteries-fuel cells: 8 percent

The executives also seem somewhat optimistic on overall capital spending. The survey says 33 percent expect capex will rise more than 10 percent in 2011 over 2010; 17 percent of the execs expect spending to be up from 5 to 10 percent and another 17 percent expect it to be 5 percent or less.

“After several years of lower investment, companies appear focused on transformation and innovation, despite the significant regulatory and economic risk factors they are confronting,” said Regina Mayor, oil and gas sector leader for KPMG in the U.S.

Despite all the gnashing of teeth over the past year, 68 percent of the executives surveyed said the new regulations enacted after the Deepwater Horizon accident have not had an impact on their offshore exploration and production.

  • 8 percent said they have shut down U.S. rigs and moved to other geographies
  • 10 percent said they have increased onshore drilling
  • 12 percent said their companies have increased emphasis on nontraditional explorations such as shale
  • 8 percent said regulatory restrictions will have little impact on long-term work