Exxon Mobil Corp.’s plans to increase its exploration and production (E&P) capital spending 10% this year is part of an aggressive move to grow overseas oil and natural gas projects as its North American production dwindles, the company said Thursday. The major also plans to continue strengthening its liquefied natural gas (LNG) business to give it an edge in U.S., European and Asian markets.

Exxon, which announced a 58% quarterly increase in earnings Thursday compared with last year, sees most of its growth coming from deepwater projects along the West African coast, according to Pat Mulva, vice president of investor relations, who presided over the quarterly conference call with analysts. Its new focus follows declines in U.S. production, especially in crude, which showed a sequential drop from the first to the second quarter of more than 100,000 bbl/d.

The Irving, TX-based major now expects to spend $11 billion on its upstream operations through the year, up from previous guidance of $10 billion. Another $4 billion will be spent on the refining and chemical businesses. Capital expenditures for the first six months were up by than $800 million from a year ago, to $5.7 billion. About a third of the expense came from the negative impact of foreign currency, but most followed the ramp up of projects in West Africa and the Caspian Sea.

Compared to last year’s second quarter, Exxon’s boe production was flat, with higher European gas demand and contributions from new projects and work programs offset by natural field declines and operational issues in the North Sea and West Africa. Second quarter natural gas production increased to 9,259 MMcf/d, slightly more than the 9,192 MMcf/d reported in 2Q02. Earnings from U.S. upstream operations were $907 million, up $230 million. Non-U.S. upstream earnings of $1,931 million were $378 million higher than last year’s second quarter.

Warmer weather and maintenance projects in Alaska led to most of the boe production decline, and 14% alone was driven by swapping oil for natural gas volumes to benefit from higher gas prices, Mulva said. He added that the company would continue its efforts to “keep our work programs up so we can arrest some of that decline.”

Mulva expressed confidence in the size and scale of Exxon’s LNG projects in Qatar, as well as its ability to use new technologies, which he said would allow the company to compete with other providers for a share of domestic and overseas markets. Discussions also are continuing on the siting of three potential LNG terminals in the United States, he said. Daily GPI Feb. 12

“Increasingly,” said Raymond, “non-conventional supplies such as coalbed methane, tight gas, long-distance Arctic pipeline supplies and LNG will fill the balance.”

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