The North American Energy Revolution

The North American energy revolution is transforming the industry and broader economy. Technology
unleashed the region’s shale oil and gas revolution, and today capital is driving it.

The opportunity is enormous: an estimated $5T in investment is expected to be required across the energy value chain through 2035. An investment opportunity this size raises a host of questions for investors, fund managers, and industry participants: Why is private equity especially advantaged to play a leading role in what will be a multi-decade, multi-trillion-dollar investment program? What are the different vehicle options investors have in order to participate in the North American capital revolution? What has been the asset class’s track record in generating returns for investors in the energy business? What are the opportunities offered by the significant restructuring efforts of the oil and gas majors?

Fundraising trends suggest investor confidence. During the past three years, the 10 top firms have collectively raised more than $53B for energy and related investments—and six of the top 10 have raised at least five funds. At the same time, first-time fund manager Kerogen Capital closed a $1B-plus maiden oil and gas vehicle in 2012.

The sector’s growing capital requirements are driving deal activity, which spans the oil and gas value chain. Last year there was a slowdown in transactions as the earlier upstream deals were digested. Going forward, how will deal dynamics evolve as the industry turns its attention to production, consolidation, and putting in place the midstream infrastructure to move oil and gas to the market?

The shale gas and oil opportunity raises a number of risks, some of which private equity is better able to shoulder than others. What is clear is that North America has proven to be an especially fertile ground for today’s energy revolution, thanks to secure property rights, available infrastructure, and a deep skill base. Ultimately, as a proven model for creating tremendous value, the long-term disciplined capital that private equity brings is a perfect match for participating in, as well as driving, the North American energy revolution.