Oil Production Cost Rising
Posted: 13 Feb 2007, 10:20
From the London Free Press http://lfpress.ca/newsstand/Business/20 ... 7-sun.html
HOUSTON -- The cost of producing oil and gas has risen about 53 per cent the last two years and the trend is expected to continue this year, according to a report released yesterday.
Those same costs have climbed 67 per cent since 2000, but most of the increase has come since the end of 2004, according to an analysis by Cambridge Energy Research Associates and its parent, IHS Inc., which together have created what they call the Upstream Capital Costs Index.
The cost drivers, according to the index, include:
- A shortage of rigs. The report says 100 new rigs could be built during the next four years, but the new supply probably won't ease demand until mid-to-late 2009.
- Premium pricing for equipment such as generators, compressors and vessels.
- A shortage of design and project managers. In particular, oil and other energy related companies are trying to fill thousands of engineering positions, brought on in part by the upsurge in offshore exploration and a wave of retirements from baby boomers.