E&P construction costs down, operating costs up.

2009_dec_cera_upstream_capital_cost_index Upstream capital costs continue to drop… (IHS-CERA)

The cost of building oil and gas exploration and production projects dropped four percent in the past six months, but operating costs increased by 1 percent, according to research firm IHS CERA, a sign that some confidence is returning to the business.
The Upstream Capital Cost Index, which tracks costs associated with the construction of new oil and gas facilities, was driven down by less overall E&P activity, which led to lower rates for drilling rigs and construction services.
Upstream steel costs fell 12 percent from Q1 to Q3, following up on a 25.2 percent drop during the prior six months.
Land rigs costs dropped 7 percent while offshore rig costs fell 3.1 percent, due to continued weak demand for jackup rigs. Yards and fabrication services were down 13 percent over the past six months.

2009_dec_cera_upstream_operating_costs_index … but operating costs are up slightly. (IHS-CERA)

The Upstream Operating Cost Index went up 1 percent fueled mainly by a six percent increase in personnel costs, but that increase was driven largely by the weakening dollar.
The cost of consumables, such as fuel and chemicals used in E&P projects, also went up.
“The IHS CERA upstream cost analyses show that some confidence has returned to the industry as oil prices have recovered and expectations rise for a strong economic recovery in 2010,” said Daniel Yergin, IHS CERA Chairman. “However, uncertainty related to present low oil demand and large spare capacity continues to hinder many projects.”