Oil Industry Plans Record Spending in 2011

One would think that BP's (BP) massive oil spill in the Gulf of Mexico would have given pause to the global oil industry, but that doesn't appear to be the case. Instead, companies in the sector are planning to spend a record $490 billion next year, including a large amount for deepwater development, The Wall Street Journal reported Wednesday, citing a Barclays Capital survey.

The record spending is projected to come from oil majors such as Exxon Mobil (XOM) as well as small outfits as the industry increases its efforts to find and extract oil and natural gas from new sources. Motivating the industry is higher oil prices that oil companies and analysts estimate will be sustained over the next few years, thanks to expected higher demand as the world starts shaking the last of the recessionary pressures.

Other findings from the Barclays survey of 402 companies:

  • Spending on new wells, producing platforms and other energy infrastructure is estimated to total $490 billion next year, up 11% from 2010. The increase partly reflects the higher costs for finding and extracting oil in harder-to-access areas.

  • The largest producers -- including Exxon, Royal Dutch Shell (RDS.A), Chevron (CVX) and BP -- are expected to increase spending by 16% to $108.6 billion.

  • Brazil's Petroleo Brasileiro, or Petrobras, will top all others in capital spending with a budget of $28.2 billion, most of which is slated for development of its deepwater oil fields off Brazil's Atlantic coast.

The Journal adds that deepwater drilling is expected to absorb an ever-larger portion of oil companies' spending. And while approvals for new drilling are still slow in the Gulf of Mexico, activity in other parts of the globe continues largely unabated.

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