Energy co spending to cross $500 billion in 2011: Barclays

The Ocean Guardian semi-submersible drilling rig contracted from Diamond Offshore Drilling by Desire Petroleum floats in location for oil drilling some 150 km (93 miles) from the Falkland Islands in this photo taken February 19, 2010.

BANGALORE (Reuters) - Global oil and natural gas exploration and production spending will likely rise about 16 percent this year to surpass the half-a-trillion mark for the first time, as companies look to capitalize on the rising demand for oil, Barclays Capital said.

A Barclays survey found that total worldwide exploration and production spending will reach roughly $529 billion in 2011, 8 percent higher than the $490 billion the brokerage had forecast in December.

U.S. crude oil prices have risen nearly 12 percent so far this year, as companies move to new territories and target unconventional spots. Brent crude prices have outpaced U.S. crude as disruptions in the Middle East and North Africa led to supply constraints in Europe.

The substantial rise in budgets is due to several factors, including the engineering and construction costs on large LNG projects, higher spending in Iraq, and increased deepwater drilling activity, particularly in West Africa and Brazil, Barclays said in a note to clients.

"We continue to be bullish on oil service and drilling stocks," said Barclays, which expects the high oil price environment to persist over the next several years.

Barclays higher forecast comes nearly a week after Dahlman Rose & Co also raised its expectations on the spending by oil and gas companies to 14 percent.

Sustainable increase in oil prices are expected to continue in at least the near-term as OPEC failed to agree on an output hike, and inventory data showed crude oil stocks fell sharply last week.

Earlier in June, the U.S. Energy Information Administration projected world oil consumption would rise to 88.43 million barrels per day this year -- the biggest revision yet by the EIA to its 2011 forecast.

NORTH AMERICA VS INTERNATIONAL

The rate of spending in North America will outpace the rise in global spending this year, led by the continued shift to explore oil- and liquids-rich shale plays and on the rising confidence in drilling in the Gulf of Mexico.

The brokerage now expects spending in North America to rise 16.2 percent this year -- compared with its expectations of a 7 percent rise back in December -- with the spending in United States alone expected to rise 18 percent.

Barclays estimates the number of deepwater units in the U.S. Gulf could grow to the mid-20s by the middle of next year, from the eight units currently working there, assuming the environmental challenges are unsuccessful.

Last week Exxon Mobil announced two big new oil discoveries and a natural gas find in the Gulf of Mexico -- its first since the drilling moratorium was lifted in the region.

The higher spending forecast in North America bodes particularly well for the profits at U.S.-focused oilfield service companies such as Halliburton Co and Baker Hughes Inc.

However, Barclays expects the rise in spending in North America to slow to about 10-12 percent next year and to the high single digit range through the middle of this decade.

In that period international spending is likely to remain in the low- to mid-teens range.

While global supermajors are expected to raise their international budgets by 19 percent this year, European and North American independents will boost spending by 23 percent, Barclays said.

However, Latin American companies are expected to be the most aggressive with a 26 percent rise, mainly driven by Brazil's Petrobras looking to double its output by 2020 and Colombia's Ecopetrol.

Barclays said spending growth in Asia Pacific this year will likely lag other areas of the world, but expects the market will play catch up as the spending growth unfolds over the next few years.

(Reporting by Thyagaraju Adinarayan; Editing by Joyjeet Das and Savio D'Souza)