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

Business Reporter

Andrew Schneider joined News 88.7 in January 2011. Since arriving in Houston, he has reported on the many changes wrought on the region’s economy by the revolution in domestic oil and gas production. His non-energy reporting runs the gamut from white-collar crime to cattle ranching. His work has aired on...

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