Schlumberger CEO: Canada, US Drilling Outlook Has Improved

NEW ORLEANS, April 7, 2008 (Dow Jones Newswires)

Natural gas exploration and production spending is set to increase in the U.S. and Canada, Schlumberger Ltd. Chief Executive Andrew Gould said Monday, part of a global trend toward more high technology and energy investment worldwide.

"The outlook for North American natural gas has improved considerably," due to low storage levels, declining liquefied natural gas imports and declining production in Canada, he said at an energy conference in New Orleans.

Increased spending in the U.S. and Canada comes as natural gas and oil prices have soared past levels anticipated at the end of 2007, when most producers drew up their budgets for this year. Lehman Brothers and other analysts saw spending on the continent flat or down this year. In the case of Canada, drilling activity plunged in 2006 and has yet to recover.

The "need to drill" is taking hold worldwide as high prices open up new areas for exploration and currently producing fields age, he said.

"Growth will be strong as the year progresses. North America and accelerated production decline throughout the world will be the two drivers," Gould said.

Predicting the location and size of that growth is getting more difficult, he added.

"Quarterly progress will be more uneven than in the past few years," he said.

While several producers have increased spending in the U.S. and Canada, most reserves are under the control of national oil companies, where spending growth is stagnating, he said.

When national oil companies raise taxes or take control away from international companies, "the result is slower investment" from the independent companies as well, Gould said.

But Gould called the shortage of skilled labor the "most important factor that stops (producers) from investing more quickly.

The combined result is seen in countries like Oman, which recently doubled the number of rigs drilling, and has only managed to slow the decline of its production, he said.

The faltering U.S. economy is by comparison a minor concern - "only a major global recession can have an effect on the exploration and production industry as far as global oil demand is concerned," he said.

NEW ORLEANS, April 7, 2008 (Dow Jones Newswires)