NEW YORK (Bloomberg) — Private equity funds are investing earlier in new energy companies and taking more risk to generate acceptable returns as competition for experienced executives in the industry increases, Lime Rock Partners Co-founder Jonathan Farber said.A “tremendous scarcity” of executives with a track record of creating value for shareholders “is a huge problem for all of us,” Farber said today in a telephone interview from Westport, Connecticut. “It’s clear that the low-hanging fruit that was there even three or four years ago has largely been picked.”

Lime Rock, Carlyle Group and Quantum Energy Partners said yesterday they will invest $470 million in Vantage Energy LLC, a six-person company with no assets that’s headed by former executives from EnCana Corp. and Bill Barrett Corp. Closely held Vantage forecasts spending $1 billion on natural-gas projects within five years, Tom Tyree, president of the Denver-based company, said yesterday.

Private equity companies have invested more than $59.4 billion of deals for energy companies this year, according to data compiled by Bloomberg. The influx allows new companies with proven managers to attract money earlier in their development, such as when they are acquiring land and don’t have production, said Farber, 38, a former investment banker at Goldman Sachs Group Inc. who found co-founded Lime Rock in 1998.

Vantage had discussions with more than a dozen private equity companies before deciding on its financial partners, said Tyree, 45, formerly the chief financial officer of Denver-based Bill Barrett. Vantage Chief Executive Officer Roger Biemans, 46, previously ran the US unit of EnCana, Canada’s largest gas producer.

Lime Rock expects to earn a return of at least 25 percent on its investment in Vantage, Farber said. He declined to provide specifics on his firm’s stake in the new producer, saying it was the largest deal in Lime Rock’s history.

“In order to generate those types of returns today, you are taking additional risks,” Farber said. “For us, that’s additional operating risk by basically investing in earlier-stage companies.”

Rising costs amid increased competition for equipment and workers to find new reserves mean producers need gas to sell for about $7 per million British thermal units to have profitable drilling programmes, he said.

Little increase in gas supply despite rising drilling in North America and additional consumption of the fuel by oil-sands projects in northern Alberta will keep prices high enough for Lime Rock to achieve its return target, Farber said.

Rising oil-sands consumption could help pare Canadian gas exports to the U.S. by 4.7 percent to 8.2 billion cubic feet a day next year, Calgary brokerage FirstEnergy Capital Corp. said in a December 13 report.

Increased use of gas by oil-sands projects contributed to Merrill Lynch & Co. in a Dec. 11 report raising its 2007 estimated gas price 3.6 percent to $7.25 per million Btu. Gas futures this year on the New York Mercantile Exchange have averaged about $7 per million Btu.