July 2007

Trends and Resources

HP Impact: HPImpact: Upstream project costs showing signs of peaking, says CERA

The dramatic cost surge in the oil and gas industry continues, but the rate of growth shows some signs of slowing, according to the latest update of an upstream capital costs index (UCCI) from market ..

Weirauch, Wendy, Hydrocarbon Processing Staff

The dramatic cost surge in the oil and gas industry continues, but the rate of growth shows some signs of slowing, according to the latest update of an upstream capital costs index (UCCI) from market analysts with IHS/CERA (www.cera.com). Costs for oil and gas projects climbed 7% to 179 points during the six months ending July 31, 2007 (Fig. 1). This compares with an increase of more than 13% in the previous six-month period. Since 2000, the UCCI has risen 79%, with most of the increase in the past two years. For comparison, the US government's Producer Price Index for finished goods (excluding food and energy) rose just 16% during the same seven-year period.

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