Daily News: January 11, 2012

CIT’s 2012 Overview Provides Look at U.S. Energy Sector

The discovery of shale gas, new drilling technologies, and hydraulic fracturing (fracking) are dramatically transforming the U.S. energy sector, said Mike Lorusso, group head of CIT Energy at CIT Group.

Lorusso discussed the key drivers for clean technology, U.S. energy independence and private equity investment in the energy sector, as well as the trends and challenges facing the sector in CIT’s 2012 U.S. Energy Sector Overview, the latest in a series of in-depth executive Q&As featured in CIT’s Executive Spotlight series (cit.com/executivespotlight).

Some of the biggest short- and long-term concerns facing the energy industry are due to the confluence of opposing forces. According to Lorusso, “The constant growth in energy consumption, the desire for energy independence, environmental and safety concerns, and pricing are the issues at hand. The “Holy Grail” would be to solve all of these issues with a clean, cheap and reliable domestic energy supply. However, that is not practical, so the industry is constantly struggling to address each issue individually while not negatively affecting the others.”

Lorusso also discussed the feasibility of the U.S. achieving energy independence, “The U.S. has been improving its ability to supply its own energy needs and we will continue to do so. This has been achieved through a combination of sources such as increased production of oil and gas from conventional and shale resources via fracturing, imports of oil through pipelines from Canada to take advantage of the abundant Canadian oil sand resources, growth in renewable energy sources, and energy efficiency programs that reduce consumption.”

Following recent developments in the Middle East, surging oil prices combined with improved drilling technologies, have encouraged private equity firms to invest in the sector. Lorusso added, “Private equity firms have invested directly by purchasing oil and gas exploration and production companies and thus benefit from producing the actual commodity. In other instances, they’ve bought mineral rights for properties and then taken the royalty payments from other companies that produce the oil from those properties. They have also been quite active with indirect investments by acquiring companies that provide the support services to the industry, such as drill rig companies and pipe and tank manufacturers.”