Last year set a 1990s record for exploration and productioncapital spending, but the five-year trend of capital spendingincreases may end this year with the first decline since 1992.That’s one finding of Global Upstream Performance Trends, a reviewof domestic and international results for 131 publicly tradedcompanies by Arthur Andersen and John S. Herold.
Last year’s increase in spending was due in part to increasinginvestment in the deep-water Gulf of Mexico, said Brian J. Lidsky,executive vice president of John S. Herold. “Herold expects thishigher level of spending in the Gulf to bear fruit in the form ofat least 25% average annual gains in production from the deep-waterGulf over the next five years.”
While the report cited increasing exploration and productionexpenditures from 1992 to 1997, it also noted the domestic gasproduction replacement rate of 106% in 1997 continued a downwarddecline from the five-year high of 136% set in 1995. “Downward gasreserve revisions of more than 100 Bcf each by EEX, Amoco, Unocal,Mobil, TransTexas and Pioneer Natural Resources were largelyresponsible for the decline,” Lidsky said. “From the drillbit only,U.S. gas reserve additions net of revisions did not even meetproduction, leaving the production replacement rate at 94%.However, this is up 5% from the 1996 level of 89%.”
Domestic gas reserves increased less than 1% to 106.7 Tcf at theend of last year, mainly due to downward reserve revisions of 1Tcf. Production continued its long-term upward trend, rising 2% to11.6 Tcf, half the 4% average annual growth rate from 1993 through1996.
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