Upstream Building and Operating Costs Hit Record Highs

The costs of both building and operating upstream oil and gas facilities have reached record highs, according to business analytics firm IHS CERA.


Upstream capital costs for oil and gas facilities rose 2.3% in the six months ending March 31. That brings capital spending costs for 2012 to over $640 billion.

Operational costs rose by just over 2% for the same period. That brings operational costs for the year to $500 billion, surpassing the previous high set in 2008.

Pritesh Patel is a senior director at IHS CERA.

“Within that six month period, you were seeing anywhere between a 6% to 10% increase in day rates for rigs. You saw continued increase in the cost of regular equipment — pumps, compressors, turbines, as well as subsea specialized equipment. And compounding all of that, you’ve got increased labor costs, engineering, project management as well, which were adding onto that escalation.”

Patel says the fall in oil prices during the second quarter has relieved some pressure on the cost of oilfield equipment. But he says day rates for offshore rigs are continuing to climb.



Andrew Schneider

Andrew Schneider

Politics and Government Reporter

Andrew heads Houston Public Media’s coverage of national, state, and local elections. He also reports on major policy issues before the Texas delegations in the U.S. House and Senate, as well as the Texas governorship, the state legislature, and county and city governments. Before taking up his current post, Andrew...

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