Marathon Oil Corp. last week released an optimistic outlook saying it continues to see growth both in the upstream and downstream segments of the oil business despite economic uncertainties that have crippled energy demand and slowed the industry’s plans for capacity expansion.

Marathon’s upstream margins were very competitive and should remain so as production increases and it focuses on reducing costs per barrel. The company has invested heavily, including development projects in offshore Norway and in the Canadian oil sands.

At the same time, the downstream segment “has performed well throughout this challenging economic environment and we expect this to continue and strengthen as the Garyville refinery expansion comes online,” said Clarence P. Cazalot, Jr., president and CEO of the company.

The company said it will continue to execute a strategy calling for production and resource growth by developing projects that create value beyond 2012. It will focus on three key growth areas: deepwater, unconventional oil and gas, and oil sands.

“Our Upstream business is, in essence, the simple calculus of adding resources that can be converted to profitable production or monetized in an efficient manner,” said David E. Roberts, Jr., the company’s vice president for upstream. “Through a combination of well-executed exploration and selective acquisitions, Marathon has tripled its resource base since 2001, with a resource life approaching 40 years.”

The company’s drilling program for 2010 included three to four significant wells in the Gulf of Mexico, two high-risk, high-potential wells in Indonesia, as well as activity in Norway, Libya, Angola and the onshore resource plays of the United States.

Through the first nine months of 2009, the company has demonstrated strong upstream production growth and expects the full year to be approximately 6 percent above 2008 levels. For the period 2008 to 2011, it continues to expect an upstream production compound annual growth rate of approximately 4 percent, including oil sands mining, despite already announced asset sales estimated to reduce previously reported 2011 production projections by about 12,000 barrels of oil equivalent per day.

These estimates exclude future potential asset acquisitions or divestitures and any contribution from future exploration successes, Marathon said.

On downstream, the company has benefited from its flexibility to run a wide variety of feedstock, shifting product yields depending on market needs and moving products to the highest netback market, said Gary R. Heminger, executive vice president for downstream.

Janet F. Clark, the company’s executive vice president and CFO, said capital investment focus will increasingly shift away from downstream toward upstream opportunities in part due to the completion of the Garyville refinery expansion.

Additionally, the 2010-2011 completion of the Athabasca Oil Sands Project Expansion 1 will further contribute to capital availability.

Clark also said the company’s portfolio optimization effort was successful, with announced asset sales amounting to $3.5 billion in pre-tax transaction value.

“As a normal course of business, we will continue to scrutinize our portfolio, seeking opportunities to create greater shareholder value,” Clark said.