Oil Exploration Snapshot: Shell, Exxon Grab the Reins as Smaller Rivals Pull Back

BP CEO Tony Hayward this week urged the the world’s oil industry to focus on the fundamentals and continue to invest in exploration and development despite crude oil’s $105-slide since July. But for many companies, the prospect of pouring money into search and development in the midst of a slumping economy and low global demand for oil is a dim one.

In a world of $40-a-barrel oil, which companies are going to jump in the driver’s seat and push exploration efforts forward?

As it turns out, many of the world’s largest oil and gas companies are maintaining their capital expenditure budgets — the amount slated each year for exploration and development — despite expensive rig contracts signed back when oil was more than $100 a barrel. The path for smaller companies — some who have taken on far riskier exploration projects in the past — is not as clear. As a result, conservative companies like Exxon that aren’t as likely to pursue risky projects will be the ones setting the pace for exploration over the next several years.

Cuts — many of them knee-jerk reactions — are already underway as companies and countries try to stem their losses as demand for oil sags and costs for labor, steel and drilling rigs rise. As oil and gas companies continue to announce their capital expenditure budgets, the debate over how much and where to invest is getting more interesting. Cutting back on production makes sense when there’s an oil glut. Determining how much to spend on risky and expensive exploration efforts is much trickier.

So for BNET Energy readers, here’s a quick snapshot of Big Oil’s 2009 capital-expenditure plans:

• Royal Dutch Shell — The world’s second-largest non-government controlled oil company will maintain spending on projects between $31 billion and $32 billion in 2009.
• Exxon — The company hasn’t revealed specific details of its 2009 capital plan beyond saying that it will continue to maintain record levels of spending over the next five years. Exxon spent $26.1 billion in capital expenditures last year, 25 percent more than in 2007. Company officials say they plant on spending $125 billion over the next five years, which of course works out to an average of $25 billion a year.
• Chevron — The company’s capital and exploratory spending program will stay the same at $22.8 billion, with $17.5 billion planned for exploration, production and natural gas-related upstream projects.
• BP — CEO Tony Hayward says BP will likely spend between $20 billion and $22 billion, around the same as last year’s $21.7 billion. Hayward says the company will save money by continuing to cut staff.
• ConocoPhillips — The third-largest U.S. oil company will slash its capital spending to $12.5 billion and cut 1,300 jobs.
• Devon Energy — The Oklahoma City-based company’s capital expenditure budget dropped more than half from $8.5 billion to betweem $3.5 billion and $4.1 billion.
• Occidental — The fourth-largest U.S. independent oil and gas company, cut its 2009 capital expenditures budget by 26 percent to $3.5 billion.
• XTO Energy — The Fort Worth-based independent oil- and gas-exploration company cuts its capital expenditure budget by $550 million. XTO plans to spend $450 million for midstream infrastructure and $2.75 billion on exploration and development.
• Suncor — The Canadian oil sands-operator slashed its capital expenditure budget in half, reducing it to C$3 billion. The company has stopped its expansion projects as well as work on two of its oil-sands projects.