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IRVING, Texas – Major oil company Exxon Mobil Corp. may raise spending on oil exploration and refineries by $5 billion next year, while competing energy producers could reduce budgets to cope with falling oil prices and a demand drop caused by the recession, a Bloomberg News report stated.
ExxonMobil expects to spend as much as $30 billion in 2009 to lease drilling rigs and expand fuel plants, a 20 percent increase from this year, CEO Rex Tillerson said during a meeting with reporters in Chicago, which was cited by Bloomberg News. However, the budget may decline by $1 billion or $2 billion from that estimate if prices for steel and other materials fall, resulting in lower project costs, he said, adding ExxonMobil has ample cash and untapped credit lines to expand in any of its three main businesses, petroleum production, refining and chemicals.
"We don’t see a need to make any cuts at this point," Tillerson said. "We don’t pay attention to the day-to-day price of oil because it’s somewhat unimportant to us."
Should ExxonMobil follow expectations, it would be the fifth-straight year of rising capital spending for the company, and a 20 percent increase would outpace the average rate of increase for previous four years, which saw 14 percent increases, according to data compiled and cited by Bloomberg.
Meanwhile, competitors including Royal Dutch Shell Plc, StatoilHydro ASA, EnCana Corp. and Petro-Canada announced planned spending cuts or postponement of projects, following oil prices’ decline from its peak in July, the report stated.
"A lot of guys could spend the money but they’re not going to get credit for it" from investors, Peter Ogden, an oil-industry analyst at National Bank Financial Inc. in Calgary, told Bloomberg News. "Conserving cash on the balance sheet is worth more at this point for many companies, at least until credit markets firm up."