The biennial Offshore Northern Seas conference in Norway's oil capital has been upbeat this week, in stark contrast to the 1998 show, when most firms were slashing exploration and production spending to compensate for slumped prices.

But for the most part the industry's biggest companies have proven slow this year to embark on an expansionist phase of production volume growth following two years of cost-cutting takeovers."I think we all went through a sobering experience with low oil prices and we all realise that these high oil prices are not stable," Royal/Dutch Shell Chairman Mark Moody-Stuart told Reuters at the conference.

He said earlier this year he expected a "controlled" rise in spending for the company.

"If you ask any of the big companies, they all believe the stable price is much lower and I believe that too," he added, putting a long-term, sustainable prices in the mid-teens.

"One shouldn't build one's future expectations on these (high prices)."The industry has a bad record of rushing to either boost or cut spending in line with swings in oil prices. But this time, even with oil prices over $30 a barrel for much of this year, most big players are taking a conservative line.

The picture looks different for pure exploration and production companies who have been readier to hike spending.A Reuters survey of 12 independent oil firms found that average exploration and production spending was set to rise 4.6 percent this year from 1999, when E&P funding was slashed by 20 percent.

Among five oil majors, projected 2000 spending was only set to edge up 0.03 percent, with BP one of the few to boost spending. But among the seven other independents surveyed spending was due to rise a large 34 percent from last year.

"We're seeing very solid performance (from existing fields) and finding through the drill enough oil to replace reserves," Dick Olver, BP's chief executive of exploration, told journalists. "That should be enough to feed growth."

Market forecasters Petrodata Research said in a report released this week that non-OPEC production could flatline in 2001 amid a deepwater rig shortage and a trend for companies more keen to please shareholders than explore new fields.

"High oil prices mean oil companies are awash with cash again and have been so for over a year now," said Petrodata analyst Maarten van Mourik.

"The new cash has not been spent on drilling wells, however, but on defending their balance sheets, buying back shares and competing with high growth technology stocks," he added."Upstream activity has been in the doldrums and is only now picking up."

The damage expected in 2001 can be traced back to the price collapse of 1998-1999, when most players postponed new projects and opted instead to drain older fields, the report said.

Even the Labour Party government of oil-dependent Norway - facing a budget surplus this year thanks to higher prices - has adopted a more cautious tone.

"It will always be potentially tempting to increase public spending in periods with large surpluses," Prime Minister Jens Stoltenberg told the conference. "However, we have learned from bigger experience that such a policy can cause great damage."(Reuters)