Oil and Gas Execs Say Focus on Renewable Energy Sources Key to Addressing Declining Oil Reserves, KPMG Survey Finds

But Mass Production of Renewable Fuel Not A Near-Term Possibility, Say 60 Percent
60 Percent Believe Trend of Declining Reserves is Irreversible

HOUSTON, May 11, 2007 - Oil and Gas Executives say government involvement in supporting the development of renewable energy sources is necessary to alleviate the problem of declining oil reserves, according to the results of a survey conducted by KPMG LLP, the audit, tax and advisory firm.

In the KPMG survey, which polled 553 financial executives from oil and gas companies in April 2007, twenty-five percent of the respondents said that at least 75 percent of government funding into energy should be directed at the renewable sources sector and a further 44 percent said that at least 50 percent of funding should be allocated in the same way. These feelings stem from the overwhelming majority, or 82 percent, citing declining oil reserves as a concern.

"These executives are deeply concerned about declining oil reserves, a situation they see as irreversible and worsening," said Bill Kimble, National Line of Business Leader, Industrial Markets for KPMG LLP. "They see renewable energy sources as a lifeline but our survey shows that the execs recognize they cannot count on them as a solution in the short-term. Consequently, oil and gas companies are sending a clear signal to the government that intervention is needed."

While oil and gas executives are keen to see renewable energy sources becoming a mass produced reality, 60 percent say that will not be possible by 2010. Of those that believe it will, 18 percent say ethanol is the most viable for mass production by then, 13 percent say biodiesel and only 3 percent say cellulosic ethanol.

Sixty percent of the executives believe that the trend of declining oil reserves is irreversible. And, when asked about the impact of emerging markets, such as China, will have on declining oil reserves, almost 70 percent of the executives said that it would lead the situation to worsen.

The executives also clearly see that there are steps that individuals can take to alleviate the issue of declining oil reserves.

"One-third of oil and gas executives questioned said that the next time they are purchasing a family car they would consider one that consumes less gasoline, such as a hybrid," said Kimble. "They clearly see demand-side as part of the solution to declining oil reserves."

When executives were asked about their upstream capital spending in the 2006 survey, the majority indicated that investment will be a factor in helping them manage declining oil reserves. Sixty-nine percent said that it would increase by more than 10 percent, a jump of 49 percent over 2005. The 2007 survey suggests that increases in spending are flattening, with 35 percent saying they expect and increase of more than 10 percent, 19 percent saying they expect an increase of up to ten percent, and 38 percent say it will stay the same. Only seven percent expect to see a decrease.

Mergers and acquisitions continue to be a trend, with 24 percent of the executives saying that they expect their company to be involved in one in the next year -- a three percent increase over last year's survey. Sixty eight percent of respondents expect private equity to play a larger role over the next year than it has in previous years.

As financial executives, the respondents put a great deal of their focus on the risks facing their companies. Forty-four percent say that the biggest risk facing their company at this time is financial; such as satisfying news regulatory requirements and shareholder demands. The next biggest risks cited, at nine percent each, were "political unrest in certain countries in which your company has operations" and "insufficient access to drilling rigs".

Other Findings

Sixty-five percent of the respondents say that while they believe global warming is occurring, it is a natural weather cycle, and 11 percent say that they do not believe it is occurring. Just under a quarter believe CO-2- induced global warming is occurring.

KPMG will be discussing these survey results during its Fifth Annual Global Energy Conference, the event for financial executives in the oil and gas industry on May 22nd and 23rd at the Intercontinental Hotel in Houston. This year's keynote speakers will be William H. Donaldson, the 27th Chairman of U.S. Securities and Exchange Commission and David Crane, President and Chief Executive Officer, NRG Energy, Inc.

The conference will address global issues and will feature leaders in the industry from around the world. Topics that will be addressed include: Business Challenges Facing Today's Energy CEO; Alternative Energy -- The Real Story; and Utilizing Tax Incentives in Alternative Energy Projects. Please see the conference website for more information www.kpmgglobalenergyconference.comm.

KPMG LLP, the audit, tax and advisory firm ( www.us.kpmg.com ), is the U.S. member firm of KPMG International. KPMG International's member firms have 103,000 professionals, including 6,700 partners, in 144 countries.

Contact:
Sam Azzouni
KPMG LLP

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