UPDATE 4-Energy co spending to jump 11 pct in 2011-Barclays
* E&P to hit highest level in 26 yrs of surveys -Barclays
* Budgets to rise most in markets like Latin America, Asia
* Bigger E&P budgets to boost oil service co. profits
* U.S. spending to rise 8.1 pct, Canada up 4.8 pct (Recasts, adds analyst comment. Changes dateline, previously NEW YORK/BANGALORE)
By Anna Driver and Joshua Schneyer
HOUSTON/NEW YORK, Dec 15 (Reuters) - Global oil and natural gas exploration and production spending will jump 11 percent to $490 billion next year, Barclays Capital forecast on Wednesday, the highest level in more than 25 years of surveys.
The spending spree, expected to boost profits at oil service companies worldwide, will be most evident in emerging markets such as Latin America, the Middle East/North Africa region and Southeast Asia, the semiannual survey of more than 400 oil companies found.
The largest oil companies should hike spending by 18 percent next year on expectations oil prices will remain high.
"The supermajors are showing the largest increase," James West, analyst at Barclays Capital said. "It indicates their belief that oil prices are going to be elevated for a longer period of time."
U.S. crude oil prices CLc1 hit two-year highs over $90 a barrel earlier this month on expectation demand could get a boost from a stronger economy, and were trading over $88 a barrel on Wednesday.
In the bank's survey released Wednesday, oil companies themselves were basing their spending projections on a more conservative oil price estimate for next year of $77.32 per barrel. That was up from the $73.56 level they had forecast when surveyed earlier this year.
The investment bank has called for an average U.S. crude oil price of $85 a barrel next year, but has said prices could spike to $100 a barrel during 2011.
For U.S. natural gas prices NGc1, companies based their spending budgets on a projected price of $4.27 per million cubic feet (mcf). The estimate was down sharply, by 18 percent, from the 2011 natural gas price assumptions of a year ago, Barclays said.
In top oil consumer the United States, exploration and production (E&P) spending is expected to rise 8.1 percent to $93.6 billion.
The boost in E&P, prompted by surging demand growth in emerging markets and recovery from recession levels in highly developed economies, has led Barclay's to increase its share-price targets by an average of 16 percent on several U.S. oil services and drilling companies, including FMC Technologies Inc (FTI.N), National Oilwell Varco Inc (NOV.N) and Dresser-Rand Group Inc (DRC.N).
More spending may also boost demand for the services of companies such as Schlumberger Ltd (SLB.N), Halliburton Co (HAL.N) and Baker Hughes Inc (BHI.N), the bank said.
"Given our strong growth expectations for the oil service and drilling industry relative to the global economy over the next two to three years, we believe the oil service stocks should command a considerable premium to the market," Barclays said in a statement.
As economies rebound from the worst global slowdown in decades, energy demand is booming across emerging markets and U.S. oil prices have recently traded near 26-month highs of $90 a barrel. That has left energy producers scrambling to produce more.
Still, bigger oil exploration and production budgets may boost and limit the upside in prices.
"I think these investments will put a cap on the market because everybody's argument is the easy oil is running out," Phil Flynn, analyst at PFGBest Research, said. "But if they're going to make this kind of investment, I think that argument goes by the wayside."
Outside of North America, E&P spending should rise 12 percent next year to $363.3 billion, as the largest private oil majors and national oil companies drill more, Barclays said.
MOST TO INCREASE SPENDING
Among the U.S. oil companies expected to significantly boost E&P budgets next year, Barclays said, are ConocoPhillips (COP.N), Hess Corp (HES.N), Pioneer Natural Resources Co (PXD.N), EOG Resources Inc (EOG.N) and Noble Energy Inc (NBL.N).
The vast majority of U.S. spending should be in conventional oil plays, liquid rich reservoirs and oil shales, while spending in traditional dry gas drilling is expected to decline, the survey said.
In Canada, spending should rise by 4.8 percent to $32.6 billion, Barclays added.
Some companies are still expected to reduce E&P spending next year, the survey indicated, including Encana Corp (ECA.TO), Southwestern Energy Co (SWN.N), Devon Energy Corp (DVN.N), Williams Cos Inc (WMB.N) and Range Resources Corp (RRC.N).
To track Barclay's price targets for U.S. oil services and drilling companies, double click on [ID:nWNAB9066] [ID:nWNAB9074]
(Reporting by Tenzin Pema in Bangalore and David Sheppard in New York; Bruce Nichols in Houston; Writing by Joshua Schneyer; Editing by Lisa Shumaker)
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