By OGJ editors
HOUSTON, Dec. 8 -- Upstream cost declines evident in the first half of the year appear to be flattening, reports IHS Cambridge Energy Research Associates.
In the third quarter, the firm’s capital-cost index fell slower than it did earlier in the year, while its operating cost index rose slightly from its first-quarter level.
The indexes assess changes since 2000, costs of which are assigned the value 100.
The third-quarter capital-cost index showed a 6-month decline of 4% to 202. IHS CERA said the decline resulted from lower levels of upstream oil and gas activity, which pulled down costs of drilling rigs and yards and fabrication.
Steel costs for upstream equipment fell by 12% between the first and third quarters of the year, following a 25.2% drop in the previous 6 months. The firm said steel costs appear to have stabilized.
Land-rig costs fell 7% because of reduced activity in the US and Middle East. Costs for offshore rigs fell 3.1% because of weak demand for jack ups.
Cost of yards and fabrication, already hurt by a slump in shipping construction, fell 13% over the past half-year as new orders declined and equipment operators faced higher funding costs.
IHS CERA’s upstream operating costs index rose 1% between the first and third quarters of 2009 to 168. The firm attributed the increase to operating personnel costs and increases in the market for consumable materials.
It said a 6% increase in operating personnel costs resulted largely from foreign exchange fluctuations.
The consumables-cost rise reflected a rebound in feedstock prices and recovery in global demand for chemicals. The largest factor was fuel costs, which increased 9%.
Hess Corp.
Federal Reserve Bank of Dallas
