Oil Exploration, Production Spending to Grow in 2010, IFP Says

Investment in oil and natural-gas exploration and production may grow as much as 5 percent next year as companies seek to add reserves amid lower costs for equipment and services, the French Institute of Petroleum said.

“Activity will pick up but at much lower costs,” Nathalie Alazard-Toux, economic and outlook director at Rueil-Malmaison- based IFP, said today at a Paris press briefing. The institute published a report showing that global investment in exploration and production will either stay stable or rise from this year’s $406 billion, which represented a 16 percent drop from 2008.

Oil companies have scrapped or delayed exploration projects as the global economic crisis erodes demand for energy, dragging down prices and squeezing profit margins. Explorers have also scaled back spending as producing countries restrict access to reserves, forcing them to rely on dwindling resources elsewhere.

As economies show signs of recovery and crude futures rebound, explorers are committing more funds to projects, leading to an increase in demand for field surveys and services.

IFP expects the market for seismic equipment and studies to expand by about 3 percent next year to more than $10 billion, recovering from a 22 percent contraction this year, according to the report. “We are entering into a period of equipment overcapacity,” Alazard-Toux said.

The market for onshore drilling will grow by 5 percent next year, while offshore operations will increase by 3 percent, according to the report.

To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net

To contact the editor responsible for this story: Guy Collins at guycollins@bloomberg.net

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