Talking out the trends at an Oil Council roundtable

Michael McMahon, partner at Pine Brook Road Partners, a private equity firm in New York:

There's a tremendous amount of investment interest through private equity. He cited large investors like CIC, which is the Chinese sovereign wealth fund, and the California pension giant Calpers. (CIC's minimum investment is $200 million). They are all ramping up their exposure to energy. But there may be a bit too much money chasing not enough good deals: "We're not quite back to the levels of the doctors and the dentists (investing in the business), but we're one step removed." But still, "access to capital is not an issue."

Shale gas is a game-changer in many ways, including the capital game, but the industry needs to be more proactive on the issue of fracing and its environmental impacts. Claiming that the secret formula of fracing fluids must remain that way is the "stupidest" response, because with industry personnel jumping jobs all the time, "whatever secrets are out there last a week."  He expressed confidence that the wastewater industry will be able to solve the issue of treating the fracing fluid that brings up plenty of undesirable materials from down the well.

With the explosion of shale gas and the liquids that go with it, "What is the incremental US oil production in the next three to five years" from those shale plays? 1 million b/d? "Certainly." 2 million b/d? "Probably." 3 million b/d. "Maybe." The impacts from that and the entire shale gas revolution will be enormous, from petrochemical industries returning to the US, to the US balance of payments, to increased taxes at the state and federal level. "The outlook for North American energy is not all that bleak."

Francisco Blanch, global head of commodities research, Bank of America Merrill Lynch:

In a world where central banks are not willing to tighten, naturally we've seen inflation rates head above interest rates, so real interest rates have turned negative. When that's combined with the tremendous rate in oil demand growth from 2010, and the loss of Libyan crude, and the fact that OPEC output barely budget from April of last year through the end of the year, it's a formula for higher prices.

Referring to the Saudi statement over the weekend that it had reduced production in reaction to no demand for its higher level of output, undertaken because of the loss of Libyan crude: "If the demand is not there, then why is Brent in backwardation? The demand is clearly there." The market is looking at an average Brent price of $140 over the next three months. But in the second half of the year, there are risks like Greece and Europe in general. Brent should average $102 in the second half of 2011.

Spending on energy as a percentage of the global economy is getting in the danger zone. The world passed the "critical" 9% level in 1980, and again in 2008, helping to send economies into recession. "We just crossed it again."

Steven Tredennick, partner at Bracewell & Guiliani:

The Securities & Exchange Commission rule on disclosing payments to foreign countries raises big risks to oil and gas companies. (His firm wrote an overview of the proposal here.) If other companies know what you paid for a lease, particularly if they are non-US companies battling for acreage around the world, "it could have significant anti-competitive effects...other companies would know what you paid."

This rule could also be a boost for private companies who would not need to disclose the information. Private equity supporting these companies could be key to their development. One solution might be to enable companies to disclose aggregate payments rather than breaking it out into such specific information.

On fracing: technology is proceeding apace so that it could be fracing fluid ultimately may not need to use any toxic materials. The elements in the fracing fluid just won't be the big issue it is now. But for now, it is a big issue, "first and foremost," and the industry is going to need to "spend a little more money, and going to have to do (its) homework."

Laurent Lavigne Du Cadet, deputy CEO, investment bankers Taylor-DeJongh:

The price of proved and probable reserves rose from $12.90/b in 2009 to $15.50 in 2010. The reason it didn't go higher is that the price of oil services rose substantially, so it gets more expensive to develop those reserves.

Asset sales in the oil and gas business worldwide last year totaled $211 billion, the highest in the last 20 years. Commercial banks are not as key in funding asset sales as they were previously.

Scott Bernstein, executive vice president of corporate finance at Buccaneer Energy, an Australian independent

Major oil companies are continuing to pull out of places and giving independents an opportunity to get in. He cited the North Sea, Alaska's Cook Inlet, Trinidad & Tobago, and the Philippines. The strength of independent oil companies is in their role as first mover. For example, they need to get into shale plays before others, and then "upsell" to other companies seeking to get in.