Straight from the big man on campus himself, Gabe Newell has confirmed that they are working on a new engine. The news was confirmed via a group that met at Valve’s headquarters, which was organized by 4chan’s /v/ section.
We’ve been working on new engine stuff for awhile. We’ll probably just roll it out in one of our games
Furthermore, Newell also confirmed that this wont just be an update to the source engine. What they are working on is in fact an entirely new engine. Of course when asked what games they are working on such as Half-life 3, Gabe jokingly dodged it by stating that Ricochet 2 is definitely in development.
So, there you have it, we are unsure what games will use their new engine, but considering how long episode 3 has been taking the company, this isn’t exactly a stretch to assume they may use a new engine. Hell, as you already have noticed, people aren’t even calling it episode 3 anymore. Valve’s next Hal-life game is more commonly known as Half-life 3.
You can check out the full interview below, but be warned that it is hard to understand what they are saying at times:
Source: engadget.com
All other engines came with a half life game so it would make sense I suppose. HL is to valve what Unreal (used to be) for Epic.