09-12-07 Oil companies including Saudi Aramco and ExxonMobil plan to boost spending by 11 % next year to $ 369 bn, the sixth consecutive year of increases, spurred by record crude prices and escalating drilling costs.
Oil and natural-gas projects in Africa, Russia and Latin America will drive the increase, according to a Lehman Brothers Holdings survey of 344 companies. In Canada, the biggest source of crude for US refiners, spending will decline 12 % because of royalty increases and deflated natural-gas prices, the survey showed.

Crude gains
Crude oil added 44 % this year in New York, on track for the biggest annual gain since 2002, as demand rose faster than output and political tensions raised concern about supply availability from nations such as Nigeria and Iran. Since June, energy companies raised oil price assumptions used to set budgets by 19 % to about $ 68 a barrel, Lehman said.
"Gains continue to be driven by strong increases in international spending,'' Lehman analysts James Crandell, Angeline Sedita and James West said in the report. The survey results "are supportive of continued gains in spending beyond 2008.''

Worldwide growth in oil demand is expected to accelerate in 2008 to 2.3 % from 1.2 % this year, the Paris- based International Energy Agency said in a November 13 report.
Saudi Arabia's state-owned oil company, known as Aramco, probably will raise spending on exploration and production by 16 % next year to $ 10.4 bn, the report said. Aramco doubled the number of rigs drilling new wells in the kingdom earlier this year in a bid to boost output to 12.5 mm bpd.

New reserves
Irving, Texas-based ExxonMobil, the world's biggest oil company by sales, probably will boost its so-called upstream budget by 7.5 % to $ 16.6 bn, Lehman analysts said. ExxonMobil is expected to cut North American spending by $ 150 mm and boost international expenditures by $ 1.3 bn as its geologists and engineers expand the search for new reserves to Madagascar, New Zealand and the Arctic, the survey showed.
Drilling budgets would be cut if oil fell to an average of $ 50.65 a barrel and natural gas dropped to $ 5.23 per 1,000 cf, Lehman said.

Some 63 % of the companies surveyed expect the "real long-term price'' of oil to exceed $ 70 a barrel.
"Companies overall have become increasingly positive on the long-term outlook for oil prices,'' the analysts said in the report.
Oil futures reached $ 99.29 on November 21 in New York, the highest since trading began in 1983. Gas futures have declined 18 % since touching $ 8.712 per mm Btu on November 2.