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End of reign for oil, gas is in sight

In 25 years, industry executives said, crude will be unaffordable.

THE WOODLANDS, Texas - Over the next 20 years or so, oil and natural gas will lose their ranking as the world's most affordable energy sources, according to a survey of energy executives released yesterday.

Deeper wells in less hospitable places, both political and geological, have altered presumptions of doing business in the oil patch.

Nearly three out of four executives and managers surveyed last month by Deloitte & Touche L.L.P. said oil and gas were the cheapest available energy sources for now, though only 23 percent said they believed that would be the case in 25 years.

Deloitte, which conducted the wide-ranging survey of 52 industry professionals via telephone, released the results yesterday at its annual oil and gas conference in the suburbs of Houston. Most of the executives work for companies with annual revenue of more than $100 million.

The sampling revealed a growing concern about the sustainability of oil and natural gas in the coming years. Future sources of fossil fuels, the cost of producing them, and the price consumers will pay are some of the biggest uncertainties facing the industry.

Alternatives needed

"Clearly, the oil and gas professionals involved in our survey are starting to think about the nation's transition to renewable energy and other alternative fuels," said Gary Adams, vice chairman of Deloitte's oil and gas practice.

Last week, Exxon Mobil Corp., the world's largest publicly traded oil company, expanded its energy outlook to include a new section on the development of all "viable" forms of energy and public policy on climate risk.

Exxon has steadfastly maintained that it is an integrated oil company, however, and that fossil fuels will provide 80 percent of all global energy needs through 2030.

The global economic malaise and its effect on crude demand in the next couple of years was a hot topic at the conference.

Adam Sieminski, an energy economist at Deutsche Bank AG, painted a bleak picture, saying global oil demand could fall 700,000 or 800,000 barrels a day in 2009, a steeper decline than many other forecasts.

Consumption to drop

The U.S. Energy Information Administration said Tuesday that it expected global oil consumption to decline 450,000 barrels a day next year, down from a November forecast of flat demand. Total world consumption is between 85 million and 86 million barrels a day, according to the EIA.

"Not only could we lose 700,000 or 800,000 barrels a day next year, but very possibly it could be twice that number," Sieminski said during a presentation.

He said crude could fall as low as $30 a barrel in the near term, but only because of the recession.

"Once the global economy recovers, I think you need a price somewhere in the $75, $80, $85 range in order to get the investment required to sustain production," he said.

Of the executives interviewed by Deloitte, 53 percent said they thought the United States could run out of reasonably priced oil within the next quarter-century, and 56 percent said the world was likely to face the same scenario in the next 50 years.

Few question that fossil fuels will be a vital energy source worldwide for many years. And the world's biggest oil and gas companies continue to spend far more trying to find new sources of oil and gas than they do on alternatives such as solar and wind.

Slightly more than 40 percent who took part in the Deloitte sampling said the U.S. energy situation was better today than it was five years ago, while 50 percent said it was worse. Six percent were not sure.