Mar 13, 2013 21:02 Exxon forecasts production to fall Exxon forecasts production to fall DAVID KOENIG| AP business writer March 13, 2013 Comments DALLAS — Exxon Mobil Corp. expects production to decline by about 1 percent this year due to weaker output of natural gas, then rise in the next few years as new projects start up. The oil and gas giant expects annual production to rise by 2 percent to 3 percent per year through 2017. It plans to spend $190 billion on exploration and development over the next five years. The company gave the forecast Wednesday at its annual meeting with analysts in New York. Exxon Mobil’s production fell 6 percent last year, but the company still earned $44.9 billion, barely missing its own 2008 record, thanks to higher refining margins. Analysts have raised concern about Exxon’s falling production and the higher costs of extracting hard-to-reach oil and gas. CEO Rex Tillerson said that 2012 production fell short of the company’s expectations because of “operational performance issues” at some facilities, lower prices and lower spending in Iraq. Tillerson said output would rise after 2013 as Exxon starts production at 22 major projects over the next three years, including expanding the Kearl oil sands operation in Alberta, Canada, and exploration in the Russian Arctic. He said most of the increase will come from oil production. Most of the new projects are tilted toward oil rather than gas. Natural gas prices in North America have been low for several years as drilling techniques allow companies to extract gas that was once beyond their reach. Exxon has been the biggest U.S. producer of natural gas since buying XTO Energy in 2010. Tillerson said that advances in exploration and drilling technology have reduced costs and made once-untenable operations attractive. As an example, he cited a liquefied natural gas project scheduled to begin production in 2014. “Papua New Guinea has been around a long time,” he said. “It is now going to be an extraordinarily profitable development, but it wasn’t that way 10 years ago.” Tillerson also said that the company is studying options for shipping Canadian crude oil to Gulf Coast refineries if the U.S. doesn’t approve the Keystone XL pipeline. Environmental groups have pressured the Obama administration to block the pipeline, which they argue would add to climate change by encouraging burning of thick tar-sands oil. A State Department report this week — based on the assumption that the oil will be used no matter what — said that other shipping options such as rail, truck or barge would be worse for the environment than the pipeline. Exxon Mobil predicted that global energy demand will grow 35 percent by 2040, with oil and gas accounting for more than coal, nuclear or other sources.