Exxon Mobil Corp, the world's largest publicly traded oil company, recently reported that its capital spending fell to US$2.8 billion in the second quarter, down from US$2.9 billion a year ago. Its quarterly profits surged to US$5.8 billion, up from US$4.2 billion last year.
However, Exxon Mobil's annual production has declined for three consecutive years, A.G. Edwards analyst L. Bruce Lanni noted, and it faces the "increasing difficulty of growing production and reserves given the company's massive size and reserve base."
Gheit said he found the industrywide disparity between profits and capital spending "puzzling."
Still, according to an annual survey by Oil & Gas Journal, worldwide exploration and production spending is expected to rise 4.8 percent this year to US$53 billion.
But that doesn't mean oil and natural gas markets will necessarily be awash in new supplies anytime soon. For one thing, oil demand is expected to grow by 3.2 percent this year to 81.4 million barrels a day, according to the International Energy Agency, leaving very little spare production capacity. Analysts estimate there is about 1 million of excess capacity globally, the bulk of it in Saudi Arabia.
The other thing to consider, said Burkhard is that "very large projects take a lot of time to get ready to start up."
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