Exxon Mobil Corp will increase its capital spending nearly 4 percent this year to $28 billion in part as the largest U.S. oil company seeks to increase its share of the global market for natural gas.

Exxon, with huge liquefied natural gas projects in Qatar and its planned deal to buy U.S. gas producer XTO Energy Inc in a $28-billion all-stock deal, has been placing big bets on future demand for natural gas and that spending will continue.

Natural gas is expected to contribute more significantly to the energy mix over the coming decades, CEO Rex Tillerson told analysts at a presentation at the New York Stock Exchange.

A large part of the increase is expected to come from power demand, the company said.

Exxon, the world's largest publicly traded oil company, also told analysts that it had completed initial tests at Iraq's West Qurna field, where it won a 60 percent stake in the field that is estimated to have 8.7 billion barrels of reserves.

Initial planning to develop the field is going well, although security in the country remains a concern, Tillerson said.

In 2010, the company said it expects its oil and gas outlook to rise 3 percent to 4 percent, while it forecast long-term production growth of 2 percent to 3 percent.

The oil giant also stuck to its longer-term range of capital spending between $25 billion to $30 billion through 2014.

The Irving, Texas company's deal to acquire XTO is expected to receive its regulatory clearances in the near future, Tillerson said, and a closing is still expected in the second quarter.

Exxon's shares were down 5 cents to $67.17 in early afternoon trading on the New York Stock Exchange.

(Additional reporting by Matt Daily; editing by Maureen Bavdek and Tim Dobbyn)

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