WEC Survey: Energy Execs See Oil in $60-80 Range for 5 Years

LONDON, Jun 4, 2007 (Dow Jones Newswires)

Senior energy executives don't expect oil and gas prices to increase dramatically in the next five years, but the political risk attached to them means coal and nuclear power will become an ever more important part of the global energy mix, a survey from the World Energy Council published Monday showed.

Out of a survey of 50 senior executives from major global energy companies and their strategic suppliers conducted over the last 18 months, more than 65% of those surveyed expected the oil price to remain in the $60-80-a-barrel range for the next five years.

Respondents saw some stability within this range. Just 5% believed oil prices would rise above $80 a barrel, and less than 30% said it would fall below $60 a barrel.

Growth in demand from the developing world was seen as the principal factor supporting the oil price. "Global demand is directly linked to China's growth. China shows no sign of a slowdown, and in an interconnected market, we will all feel the impact," said one executive. Energy consumption in western countries is expected to grow more conservatively.

Ninety percent of those interview expected the global geopolitical situation to remain tense in the next five years. Instability in the Middle East, Russia and the nuclear stand-off with Iran were seen as the greatest risks to energy supplies and prices.

Seventy percent of executives saw no resolution to the conflict in Iraq in the next five years. A fifth still worried about the stability of Saudi Arabia. The reliability of Russian gas supplies to Europe was a common concern.

With oil and gas reserves politically uncertain, the majority of executives saw coal as a major growth fuel in the medium term and a stabilizing factor in energy prices.

Abundant supply, new extraction technologies and accessible resources led many respondents to predict a "coal renaissance" in the next five years.

Seventy percent of respondents expected coal prices of $50-60/ton in the next five years, although some estimates went as low as $30/ton. As coal's share of the energy mix grows it should apply some downward pressure to oil and gas prices, they said.

The main question over the growth of coal was environmental. "Coal needs to be clean to be viable. Technologies already exist; the issue is their application," said one respondent.

Eighty percent of those surveyed said U.S. natural gas prices would be in the $10-15/MMBtu range over the next five years. Growing U.S. liquefied natural gas imports will be an important factor in gas prices around three years from now, they said.

While executives expected gas to remain an important fuel for heating and chemical manufacture, 60% said its use in electricity generation will decline.

Eighty percent of respondents didn't expect to see electricity demand in the developed world growing significantly in the next five years. Developing countries' governments are likely to have to subsidize nuclear or hydroelectric power generation to ensure reliable supplies in the future.

Seventy percent of executives said a new generation of nuclear power stations is important for energy security and expected to see growth in nuclear's share of the power mix. However, 30% of executives didn't believe the issues of nuclear waste disposal and disaster prevention had been adequately addressed by governments around the world.

Half the executives surveyed believed coal would be the backbone of reliable electricity supplies over the medium term.

A majority thought growing demand would increase political pressure for greenhouse gas emission controls. Respondents saw continued growth in alternative energy such as biofuels, wind and solar power, backed by government action to encourage investment.

Executives supported the adoption of international standards for emissions control, but 80% didn't believe an agreement would be reached on this in the next five years.

Ninety percent of those surveyed said environmental concerns would impact energy industry economics in the short and long term, but more than half said the commercial deployment of clean energy technology was progressing too slowly.

"Governments need to assist with cost, focus on building technology and less on credits," said one executive.

To address all these issues, a large majority of executives said the industry needs to re-evaluate its strategies and show greater creativity in all aspects of planning and technology.

"There needs to be more cooperation between western and non-western companies. We live in an interconnected world, we need interconnected solutions," said one respondent.

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