Exxon sees '08 capital spending up 20 percent

Typography

Chief Executive Rex Tillerson, speaking at the company's annual meeting with analysts in New York, said the increase in spending was due in part to the timing of new projects.

NEW YORK (Reuters) - Exxon Mobil Corp <XOM.N> plans to increase its capital spending by about 20 percent to $25 billion in 2008 as it works to start up major projects in the face of industry-wide cost increases, the largest U.S. company said on Wednesday.

Chief Executive Rex Tillerson, speaking at the company's annual meeting with analysts in New York, said the increase in spending was due in part to the timing of new projects.

Exxon said it plans to participate in the start-up of 19 major new oil and gas projects by 2010, which should add about 725,000 barrels of oil equivalent per day at their peak. It expects 12 major projects to start production this year alone.

But Tillerson said that the rising costs that have hit the whole oil and gas industry were also a major contributor to the increased spending.

!ADVERTISEMENT!

Costs to drill for and produce oil and gas have nearly doubled since 2000 as record oil prices have driven demand for the steel, equipment and labor necessary for projects sky high, according to a Cambridge Energy Research Associates study.

Exxon repeated its previous forecast of annual expenditures ranging from $25 billion to $30 billion for the next several years. It said it expects capital spending to average in that range from 2009 until 2012.

Although Exxon posted the highest-ever annual profit in U.S. history in 2007, when capital spending rose 5 percent from the previous year to about $20.9 billion, it has been criticized by some for not spending enough to explore for or buy new oil and gas reserves.

Exxon replaced only 76 percent of its production with new oil in 2007, hurt by asset sales and the seizure of a project by the Venezuelan government.

Industry analysts typically expect oil and gas companies to replace more than 100 percent of their annual production as a sign that they are growing.

Shares of Exxon were down 16 cents to $86.52 in morning trading on the New York Stock Exchange trading.

(Reporting by Michael Erman, editing by Mark Porter and Gerald E. McCormick)