The oil and gas industry is apparently one of the few industries not worried about the strength of the global economy and plans to increase capital spending by 13.4% in 2012, according to a recent survey conducted by Global Data. The funds will be spent across all regions of the world in the continued search for the energy resources needed to meet future global demand.

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Spending for 2012
The energy industry is expected to spend $1.04 trillion in 2012 on various oil and gas projects, up from the $916 billion spent in 2011. North America will be ground zero for this capital spending with an estimated $254 billion, or about 25% of the total spending allocated here. This level of spending will represent a growth of 16% over 2012, and will make uncovering oil and gas futures very exciting. The areas expected to see these funds are well known to investors and include shale oil and gas plays and the Canadian oil sands.

Oil Demand
This increased spending will be sorely needed if current projections on energy demand are realized. It will be very important for traders to know the basics of investing in the oil and gas industry, especially since analysts estimate that global energy demand will increase 30% from 2010 to 2040, with demand for most fossil fuels strong over that time frame. Natural gas demand is expected to increase at an annual rate of 1.6% through 2040, while oil demand is estimated to grow at 0.7% annually.

Leading Spenders
The largest integrated and national oil companies will spend the most capital in 2012 and beyond with Exxon Mobil (NYSE:XOM) and Petrobras (NYSE:PBR) estimated to spend $409 billion through 2016 on various projects. One project that Exxon Mobil will be working on is the Hebron project, a heavy oil field located offshore Eastern Canada. The field may contain up to 700 million barrels of recoverable resources and will come on line in 2017. The company expects production at Hebron to eventually reach as much as 180,000 barrels per day and has taken on Chevron Corporation (NYSE:CVX) and Statoil (NYSE:STO) as non-operating partners at this project.

Petrobras has a strong exploration and development program targeting the pre-salt formations off the Brazilian coast, and will spend much of its capital on this area through 2016. The company is also active across other global regions and has interests in the Gulf of Mexico. It operates the Chinook and Cascade projects in the Gulf of Mexico and initiated production from the Cascade field early in 2012. The company is continuing development work on Chinook along with partner Total (NYSE:TOT), which owns a 33.33% share of this project. Petrobras also has a 20% interest in the BP (NYSE:BP) operated Tiber discovery, which holds an estimated 3 billion barrels of total oil and gas resources.

The Bottom Line
The oil and gas industry is not the most popular business and receives much criticism from environmentalists and others. Despite the occasional opprobrium heaped upon it by its detractors and the many risks oil and gas companies face, the industry is a major contributor to the world economy and is essential to the maintenance of our standards of living.

At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.

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