Investors get much of oil firms' cash windfall

By Alex Lawler - Analysis

LONDON (Reuters) - The five largest fully publicly traded oil firms are spending more on finding and producing oil, but the industry is still handing back much of its windfall from record oil prices to investors.

Exxon Mobil, Royal Dutch Shell, BP and two smaller rivals upped capital spending to $29 billion (14.8 billion pounds) in the first quarter -- and spent $20.7 billion on dividends and stock buybacks.

Oil companies are handing cash to investors because they plan their businesses at lower prices than today's. Even though the industry is investing more, some say spending on new supplies remains too low.

"The money that is put in is not enough," said Fatih Birol, chief economist at the International Energy Agency, an adviser to 27 industrialised countries, referring to investment by international and national oil firms.

"We can either do two things -- either step up the investment or slow down the demand growth."

Record earnings have brought the oil industry under the scrutiny of politicians and consumer groups, who are upset about skyrocketing fuel prices at the pump.

Oil firms are lifting spending after years of underinvestment and rising demand helped propel crude oil's rally from below $20 a barrel at the start of 2002 to a record $123.93 on Wednesday.

Executives such as Shell Chief Executive Jeroen van der Veer say their companies are doing their bit. Shell invested $7.6 billion in the first quarter, more than larger rival Exxon.