The world's five biggest publicly traded oil and gas companies have
failed to respond to rising oil prices and their spending on
exploration for new resources fell in real terms between 1998 and 2006,
according to a report by U.S. think tank the James A Baker III
Institute for Public Policy, the Financial Times reports Monday.
BP PLC, ExxonMobil Corp., Chevron Corp.,
Royal Dutch Shell PLC and ConocoPhillips used 56% of their
increased earnings from higher oil prices during the period on share
buybacks and dividends instead of exploration, the report found.
"The oil majors are not replacing reserves and, therefore,
are seemingly slowly liquidating their long-term asset base," said
co-author of the report Amy Myers Jaffe. "They may see a declining rate
of production over time."
The decline was reversed in 2006, during which the five companies increased exploration spending by 50% over 2005.
The next 20 largest publicly traded U.S. oil companies have
increased exploration spending since 1998 and it now matches that of
the big five.
The report shows that the big five have also turned over
much of their spending on research and development to second-tier oil
services companies.