NEW ORLEANS -- Leaders of several energy-related companies avoided talk about a rebound in oil prices Monday and suggested it could be a long, slow recovery even as the search in deep waters goes on.

Companies in all aspects of energy production likely will be dealing with tighter budgets well into 2010 as supplies of oil and natural gas exceed demand.

"We think recovery is going to be modest over a long period of time," ConocoPhillips CEO Jim Mulva said during a presentation to investment analysts at the Howard Weil Energy Conference.

The number of fringe projects are in decline as producers and service companies focus their attention and money on deepwater drilling, which requires hundreds of millions of dollars to develop - - and are based upon long-term projections of where supply and demand are going.

"Deepwater is going to be where it is," said Pete Miller, CEO of Houston-based National Oilwell Varco Inc., which builds and maintains drilling rigs.

At last week's sale of federal offshore leases off the coasts of Louisiana, Mississippi and Alabama, the heart of the Gulf of Mexico's deepwater industry, high bids dropped 80 percent to $703 million from 2008's record sale of $3.67 billion.

The significance of that is being debated. Some analysts said low energy prices were the cause, but others said that with a large backlog of deepwater leases, explorers cut back new lease buys.

In a report issued last week, analysts at Morgan Stanley said low oil prices and the lockdown in world credit markets have cut deep into offshore activity.

Because of the delays and cancellations, additional potential production in 2011 has been cut by 2.4 million barrels of oil daily, Morgan Stanley said.

Still, Marathon Oil Corp. CEO Clarence Cazalot said the company's upstream business, such as exploration and production and oil sands mining, are projected to deliver a combined production growth of 4 percent compound average annual growth rate through 2011.

The current slowdown could hamper the industry's ability to bounce back when the economy does. SUBHEAD: Tight budgets are likely to follow energy companies into 2010.

Originally published by ALAN SAYRE Associated Press.

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