HOUSTON—With renewable energy and the growth of electric vehicles set to affect the oil market, there are some legitimate concerns about what the future looks like in terms of investing in the industry.

No one can say for sure what the changes will be in 10 years, but a group of panelists during Privcap’sGame Change conference on Dec. 5 said investing in oil and the infrastructure into the next decade remains safe.

It’s beyond 2030 when the impact of the change in energy consumption will be felt.

“The next 10 years I don’t think people have that big of a concern the demand destruction,” said Nate Walton, who is partner and co-head of North America Private Equity Ares Management and the son of NBA legend Bill Walton. “If you look at most global forecasts whether it’s BP, Shell or any of the consulting firms 2030 is generally when the curve starts to bend.

“The only question is, does that curve start to bend in 2030, 2035, 2040 and at what velocity? But over the next 10 years, if you are an investor, you have to forecast that with limited data. So you will see every year people trying to extrapolate electric vehicle penetration and then make 10 to 20 year assumptions because that will eventually affect the long-term demand.”

But nonetheless there is concern about what the future looks like as investors consider their options with the demand of electric vehicles poised to explode. There will always be a need for oil even with expansion of renewable energy and electric vehicles. The uncertainty is around how much.

“I think the big questions around oil demand is what is going to happen to the transportation fleet and what impact does that have on the consumption of oil,” said William Brilliant, who is a partner at Global Infrastructure Partners. “That’s a risk to the demand side. I think the support for oil demand is increasing standards of living and just and demographic trends around the world, largely centered off growth in Asia.

“As for where do we see the demand for oil in 10 years, I won’t give a number but I will say that everything we see suggests that you still have a growing oil market for the next decade. When you look at those counter balancing forces you see more on the growth and demand side than you do on demand destruction.”

For now, however, the business of investing in infrastructure even in a volatile oil market is still good. Brilliant, along with the rest of four-member panel, seemed to agree that this is pretty compelling time to invest in the oil industry.

“There are robust opportunities. Certainly the price of oil is volatile,” Brilliant said two days before OPEC cut the world’s oil supply by 1.2 million barrels per day. “The underlying fundamentals are you’ve got a change, a shift in terms of supply and being balanced over time.”

What was interesting is that the panel cautioned against bargain basement shopping during this time of volatility and uncertainty. They all agreed that assets worth having are not being given away for cheap.

That much was learned in the previous oil downturn..

“The big lesson for the whole industry was that great assets didn’t go for cheap,” Walton said. “If you go back to 2015 and 16 there was a lot of public pronouncements by people who actually don’t know the energy industry but are big capital providers who said `this is going to be a golden era. We’re going to buy things for pennies on the dollar.’ So many of energy companies today are investment grade companies, about 80% of the companies are investment grade.

“Those company’s don’t sell Eagle Ford at $35 dollars, they might sell their tier 2 or tier 3 assets but the real high-quality assets wouldn’t go for sell. So the lessons for us as investors was you cannot get your best opportunities if you are simply waiting to buy assets on the cheap when the market goes down. You have to figure out a way to get those companies capital in a different manner if you want to invest at the bottom of the cycle.

“In the next oil decline I don’t think you will see you will see the distress hedge fund show up again because I think they learned the lesson that this is a different industry. Not everyone has a price in the commodity related business.”

EnCap Investments partner Brad Thielemann agreed with Walton— mostly.

“The only thing I disagree with Nate is I do think certainly a lot of the assets are held within high-quality, credit-worthy public companies, and we bought a lot of assets from some of those companies as well as they hit the downturn as they were shedding and they might not have been at the top quartile of their asset base but our but our team that maybe they can go do something else that they had missed from a completion standpoint,” Thielemann said. “Certain areas of the asset had not been optimized. We saw some opportunity over the last three or four years, but we always wanted to have a vision that you could move that opportunity into a top economic play that somebody would ultimately want to buy.”

The Permian Basin or Permania, as it is known in some circles, sits on the opposite end of the bargain basement spectrum. Because of how proven the rock is in the West Texas basin there continues to be a premium investors are willing to pay to wedge their way in.

Investors want in whether it’s on the upstream or midstream side.

“But when you are looking for the best opportunities I think it all kind of leads you back like a magnet to certain areas like the Midland Basin and Delaware Basin and that’s where a lot of capital network marketing activity is, as well,” Thielemann said. “So I think when you look at where you can go build something, where you can execute to full field development and ultimately where you can go exit when there is an open market. The Permian is for real, and it’s there for a good reason.”

Walton, who made his billions in the oil patch after playing basketball at Princeton, said his company originally invested in the sector through an upstream public company. They weren’t sure how to get back in because of the new market price but eventually partnered with Epic and they are currently constructing two 800-mile pipelines with one transporting NGL and the other will transport crude.

That investment, Walton said, is sound even in a volatile oil market.

“Those are billions of dollars of infrastructure and partnership with some of the largest Permian public companies out there because of 10-plus 20-year view on the validity of that basin,” Walton said. “So with oil pricing going down $20 does not matter to a 10 to 20-year pipeline project that you are developing.

“You can’t build those types of pipelines at a subscale basin because they don’t have enough long-term inventory to justify the capital expense. But in the Permian with 20 to 30 years of inventory you can put billions of dollars to work because of that long-term inventory behind it. I think that is one of the reasons for investors like ourselves who like scaling down so the protection so the Permian is a place we are also going to try to put capital forth.”

Terrance Harris can be reached at tharris@hartenergy.com.