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Oil Industry Set for Record Exploration Spending in 2011

The semi-submersible oil drilling rig the Ocean Guardian under tow in British coastal waters, 22 Feb 2010

A new report says the global oil industry is planning to spend a record $490 billion next year on oil and natural gas exploration.

The London investment bank Barclays Capital says that its survey of 402 energy companies - from large international companies to very small operations - shows that exploration spending will increase in 2011 by 11 percent compared to this year.

It said some of the increased spending will occur because untapped oil and natural gas deposits are increasingly located in areas that are hard to reach. But the bank also said the energy companies are spending more because they believe that today's high oil prices will be sustained.

The price of crude oil has lately topped $90 a barrel and some analysts now believe it could reach $100 or more next year. That could result in bigger profits for energy companies and almost certainly would cost consumers more to drive cars and heat homes.

In part, prices have been rising because the 12-member Organization of the Petroleum Exporting Countries has shown no inclination to increase oil production, which would tend to tamp down prices. The OPEC cartel produces nearly 27 million barrels of oil a day, about 40 percent of the world total.

The largest oil and gas producers - such firms as ExxonMobil, Royal Dutch Shell, Chevron and BP - plan on boosting their 2011 exploration spending by 16 percent to more than $108 billion. Rio de Janeiro-based Petroleo Brasileiro is expected to spend the most of any company, more than $28 billion. It is developing deep-water oil fields off Brazil's Atlantic coast.

Chevron says it is increasing its spending by 29 percent for several offshore projects, including deep-water exploration in the Gulf of Mexico. Drilling has been slowed there in the aftermath of BP's fatal Deepwater Horizon drilling rig explosion last April.