BY CONTINUING TO USE THIS SITE, YOU ARE AGREEING TO OUR USE OF COOKIES. REVIEW OUR
COOKIE NOTICE

Register with us today

and in less than 60 seconds continue your access to:Latest news headlinesAnalytical topics and featuresCommodities videos, podcast & blogsSample market prices & dataSpecial reportsSubscriber notes & daily commodity email alerts

Already have an account?

Log in to register

Forgot Password

Please Note: Platts Market Center subscribers can only reset passwords via the Platts Market Center

Enter your Email ID below and we will send you an email with your password.


  • Email Address* Please enter email address.

If you are a premium subscriber, we are unable to send you your password for security reasons. Please contact the Client Services team.

If you are a Platts Market Center subscriber, to reset your password go to the Platts Market Center to reset your password.

In this list
Electric Power

Natural gas prices to stay low, US renewables to grow: survey

Bunker Fuel | Electric Power | LNG | Crude Oil | Steel | Tankers

Market Movers Europe, Jun 17–21: Tensions rise in Middle East; Mozambique LNG decision expected

Electric Power

Platts M2MS-Power

Commodities | Energy | Electric Power | Emissions | Renewables | Natural Gas | Natural Gas (North American)

Northeast Power and Gas Conference

Electricity | Coal

Enel intenta cerrar su planta de carbón de Chile seis meses antes de lo previsto

Natural gas prices to stay low, US renewables to grow: survey

Highlights

Ninety-two percent of energy executives surveyed for KPMG's 2016 Energy Business Outlook said they expect natural gas prices to stay below $3/MMBtu in 2016, and 62% estimate that renewable resources will supply half of the US footprint's power by 2045.

Not registered?

Receive daily email alerts, subscriber notes & personalize your experience.

Register Now

Those are two of the key power- and gas-related results from the survey, released Tuesday afternoon.

Regina Mayor, national sector leader for energy, natural resources and chemicals for KPMG, on Tuesday chaired a media roundtable in Houston during which the survey of more than 150 senior energy executives was discussed, including how low commodity prices and shifting technological and political trends are causing big changes in energy companies' business models.

Respondents "were much more bearish than last year" on energy commodity prices, Mayor said.

Article Continues below...

Eighty-eight percent of respondents said they expect Brent crude oil to average below $50/b in 2016, and just 10% said they think it will average $50 to $59/b.

"This new 'lower for longer' commodity pricing environment has made it necessary for energy executives to devise new ways get access to capital to fund short- and long-term strategic activities," Mayor said in a statement. "For this reason, companies are taking necessary actions to identify areas of greater efficiency and looking at organic and inorganic growth strategies."

Forty-one percent of survey respondents said they expect big changes in utility business models to a more distributed, unbundled model that changes how energy is generated and delivered.

"The prolonged commodity price situation, technological advances and other disruptive forces have been shaking up the energy industry for some time now, creating challenges and opportunities for companies across all energy segments and operational activities," Mayor said. "Companies have seen that the way to thrive and remain competitive is by ensuring that their organizations are continually making growth and a focus on capital spending efficiency a strategic priority."

For example, she noted that 94% of respondents said their organization's operating model would probably be disrupted in the next three to five years, 92% said their company would be involved in a merger or acquisition over the next two years, and 73% said they expect their company's work force would remain the same or decrease over the next two years.

That last headcount number is the reverse of what it was in the 2015 survey, Mayor said.

Matt Smith, KPMG industry leader for energy, natural resources and commodities, said a key long-term trend in the US power market has been a flattening or decreasing of power demand growth, over the long term, which is likely to result in more mergers and acquisitions.

"Absent growth, one way to keep the bottom line up is scale," Smith said, but he noted that the Exelon-Pepco merger has shown how expensive and time-consuming such efforts can be.

Asked whether the failed attempt by affiliates of Hunt Consolidated to acquire Oncor, Texas' largest transmission company, from the bankrupt Energy Future Holdings might cause the industry to back off the possibility of creating real estate investment trusts for transmission companies, Smith said, "I don't think that deal is over yet."

When the Public Utility Commission of Texas resolves how the tax benefits of REITs are handled, such a deal could still happen, he said.

"If they can make that deal work, you will see other companies do something similar," Smith said. "You have to have the regulatory solution carried out at the front end of the deal."

Mayor said, "We have other clients looking at that structure."

Smith said the large number of municipal power and water utilities that operate at relatively inefficient levels may be targets for acquisition, as well, as the utilities' environmental costs mount.

Top energy executives have determined that the short-term fixes implemented in the past year -- cutting travel, training and contract services, for example -- are "not going to help your organization survive," Mayor said.

Respondents are "hunkering down for the long term, but also trying to radically rethink a lot of their views, the way things have always been done," Mayor said, adding that she thinks these efforts will ultimately result in a "more sustainable" organization, "but it's quite painful right now."

--Mark Watson, markham.watson@spglobal.com

--Edited by Annie Siebert, ann.siebert@spglobal.com