(Houston, Washington and New York) – Today, members of Akin Gump’s global energy and transactions group provided a briefing for members of the media that included a look forward to U.S. and global trends in energy production in 2014.
The panel comprised energy regulation, markets and enforcement practice co-head Suedeen Kelly, energy partner Stephen Davis, London partner and Moscow partner in charge Sebastian Rice, global project finance practice co-head Adam Umanoff and financial restructuring partner Ira Dizengoff. The briefing was moderated by Rick Burdick, chair of the firm’s global energy and transactions group.
Ms. Kelly discussed distributed generation (DG)—“electric generation that’s connected to the distribution system as opposed to the transmission system,” in her definition, based in small generators typically but not exclusively owned by electric customers rather than utilities. She noted that it has the potential to be a game-changer for the electric industry, taking market share away from traditional electric utilities. She pointed to five factors driving DG’s growth: its affordability, customer empowerment, reliability, environment and efficiency, and new market opportunities in the face of stagnant electricity demand.
Mr. Davis spoke about the growth of the United States as an energy exporter, mentioning the exportation of natural gas by pipeline, compressed natural gas, coal and gas-to-liquids. He spotlighted trends in the exporting of liquefied natural gas, petroleum products (primarily gasoline, jet fuel and diesel), liquefied petroleum gases (primarily propane and butane) and crude oil, while noting that there is debate regarding the security considerations of the exportation of oil by the United States.
Mr. Rice discussed the increase in opportunities in West African energy, especially Nigeria, Gabon and Ghana, which produce roughly one third of Africa’s output. As major international oil companies (IOCs) continue to invest actively in the region, the years ahead are expected to be a transformative period for its oil and gas market. However, he noted that IOCs face risks and challenges, including political instability, significant security concerns, corruption and underdeveloped infrastructure and services in the region.
Mr. Umanoff outlined prospects for domestic renewable energy (primarily wind and solar) over the medium term, observing that “the landscape is changing.” He noted that the growth of the wind market has been substantial—over 60,000 MWs in cumulative capacity or “over one fifth of the world capacity for installed wind”—driven by policy support, notably the federal production tax credit. However, uncertainty on a policy level has diminished growth in 2013. By contrast, solar has seen steady growth in each of its three sectors—residential, commercial and utility. However, low power prices and cheap natural gas threaten the continued growth of renewable energy.
Mr. Dizengoff noted the number of energy sector chapter 11 filings in 2013 and identified among the contributing factors cheap and abundant natural gas, environmental compliance costs and government promotion of renewable technologies. He also spotlighted tax sharing agreements as a notable feature complicating energy company restructurings in 2013, noting Edison Mission Energy and Energy Future Holdings as two case studies in this regard.
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