The possibility of a new wave of massive mergers by cash-rich oil groups was signalled yesterday as ConocoPhillips held talks to buy Burlington Resources for $30bn (£17bn) to create the largest gas producer in north America.

The move came as the price of Brent crude rose - by $1 a barrel to $58.44 - over fears of supply disruption following the Buncefield explosion and Opec's decision to cut production.

Today Shell will show its intention to spend more of its cash mountain when it unveils plans to increase its annual capital expenditure from $15bn to $20bn. BP has already made it clear that it is interested in further acquisitions but has refused to comment on speculation that it might bid for the Chinese oil group Sinopec.

Oil firms are awash with money after global crude prices hit $70 a barrel in September, sending petrol costs for British motorists - and gas values - soaring.

Shares in Burlington rose 7.3% to $81.65 in New York and lifted other smaller natural gas companies, such as Williams (by 4%) and Chesapeake Energy (by 2.5%).

Neither Conoco nor Burlington would confirm that discussions were under way but Wall Street believes a deal will be signed as early as this week.

Fadel Gheit, an oil analyst with the New York brokerage Oppenheimer & Co, said: "It's an excellent deal, although the Street might perceive it negatively that ConocoPhillips is paying such a premium. But I think these assets will be worth a lot more tomorrow or next year.

"It's also the tip of the iceberg. Oil companies have been trying to grow organically but all the majors realise it's a waste of time - it's easier to buy assets. You get instant gratification and no surprises."

Conoco said last month that it planned to increase its capital spending by 13% to $5.1bn a year to take advantage of new opportunities and mitigate the impact of a weaker dollar and rising costs for materials such as steel for platforms.

Shell is one of the largest oil and gas companies in particular need of a production boost after a disastrous 2004, when it wrote down its reserves by nearly a quarter and subsequently sacked its top executives. Today, the Anglo-Dutch group, which rejigged its financial structure to enable it to make acquisitions more easily and manage more effectively, will announce an increase in spending to boost reserves and pay for cost overruns.

Shell's Sakhalin gas project in eastern Siberia has run wildly over-budget, as did its Bonga field in Nigeria, which has just begun operating, one year late, and the ENI-operated Kashagan project in the Caspian Sea.

Analysts believe that a rise in spending up to $17bn will help Shell's share price but anything over this could be negative, especially if the reasons given are that more cash is needed to defray inflationary costs rather than boost exploration.

Meanwhile, a report out today from a powerful committee of MPs argues that Britain could be losing out on the benefits of early deregulation of the energy market because of a reliance on imports from the unliberalised market in continental Europe. Big energy users, from factories to power stations, face another decade of buying supplies through a "malfunctioning forward gas market," the Commons' trade and industry committee said.

At the same time, the rising cost of energy is pushing more people into fuel poverty. The MPs' report into the security of UK gas supplies comes amid mounting concern that the cost of gas and worries that some big energy users could be cut off this winter will undermine Britain's competitiveness as a manufacturing base.

Peter Luff, the committee chairman, said: "It is far from clear that all energy users have derived continuing and sustainable benefits from the early liberalisation of the energy market in the UK. The problem is caused not only by matters outside the control of government but also by a legacy of slow development of infrastructure and the lack of a true European market for gas."