Upstream costs continue to rise, says IHS

Offshore staff

CAMBRIDGE, Massachusetts – The costs of building and operating upstream oil and gas facilities continues to increase, says IHS. From 3Q 2011 to 1Q 2011, two cost indexes developed by the organization registered their largest increases since the Great Recession.

The IHS CERA Upstream Capital Cost Index rose 5% and the IHS CERA Upstream Operating Cost Index rose 2%, according to the report. The comparisons are indexed to the year 2000.

“The steady rise of upstream costs is a product of confidence changing outlook,” said IHS CERA chairman and author of the Pulitzer Prize-winning book, The Prize, Daniel Yergin. “That perspective—reflecting expectations for stronger oil and gas demand—is taking the form of an increased rate of new project construction.”

Steel, equipment, and labor contributed the most to the capex costs. The opex increase came from market fundamentals, personnel costs, and high oil prices. IHS says all opex markets are projected to continue rising in 2011.


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