EXXON <XON> OIL AND GAS PRODUCTION ROSE IN 1986 Exxon Corp said in its annual report that it raised production in 1986 although it did not replace all oil and gas produced. The company said that it added about four pct to production bringing it to 1.8 mln bpd, the highest level since 1979, based largely on increased production of oil overseas but additions to its reserves from new discoveries and reserve acquisitions did not replace all of the oil and gas produced. The company said that the average price for oil and gas declined 41 pct in 1986 from the previous year sparking a 38 pct decline in its earnings from exploration and production. Exxon's earnings from exploration and production in 1986 fell to 3.1 billion dlrs from 4.9 billion dlrs in 1985. Exxon said that its principal gains in production came from the Gulf of Mexico, Alaska, the North Sea, Malaysia and from oil sands in Canada. Exxon also said that it acquired 11.2 mln acres for expoloration spread over 10 countries including the U.S, Europe and the Far East. But capital expenditures for exploration and production were cut to 4.6 billion dlrs from 7.6 billion the previous year and further reductions were expected in 1987. Exxon said that its net share of crude oil and natural gas liquids produced from offshore fields in the North Sea reached a new high of 422,000 bpd. The light, sweet crudes produced from these North Sea fields also gave the company trading gains as Exxon was able to sell much of this crude and replace it with cheaper, lower quality crude oil for its refineries which have been upgraded over the past several years. The trading gains and lower acquisition costs gave Exxon more of a spread in its refinery operations and added to earnings gains from refining and marketing. Exxon said earnings from refining and marketing operations rose to nearly two billion dlrs in 1986, up from 872 mln dlrs in 1985. The company said petroleum sales slipped slightly to 4.043 mln barrels per day from 4.082 mln bpd in 1985 while crude runs rose to 3.0 mln bpd from 2.9 mln bpd the previous year. Exxon's refinery operations benefited from a three year 500 mln dlr upgrading program to its Baytown, Texas refinery completed last October and an 850 mln dlr upgrading project in Rotterdam both of which emphasize utilizing lower grade crudes to extract higher proportions of light products.