The latest Upstream Capital Costs Index (UCCI) survey from IHS unit Cambridge Energy Research Associates (CERA) suggests that the ‘dramatic cost surge’ in the oil and gas industry may be slowing. The UCCI showed costs increasing 7% in the six months ending March 31, 2007, compared to a 13% hike in the previous six-months. Since 2000 the index has risen 79% (mostly in the past two years), compared with a 16% rise in the non energy and food index since 2000.
CERA researcher Richard Ward notes, ‘In 2006, the annual rate of project inflation was 30 percent. If this trend continues, it is possible that a plateau may be reached in 2008.’ But Ward cautions, ‘We are not yet at the top of the cost increases. Cost relief may not be seen until 2008/09.’ The survey also notes constraints due to the cost of experienced personnel and project management issues as projects are on hold pending capital equipment availability.
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