Cost of Field Development Projects to Decline 12-13 Percent Year-On-Year in 2009
Oslo (ots/PRNewswire)
ODS-Petrodata has recently revised its MSS Cost Index for field development projects based on a worsening outlook for the global economy, commodity prices and contractor margins.
Global field development and pipeline construction investment, not including drilling, is expected to decline by 15 percent in 2009 relative to 2008, primarily linked to a reduction in project costs. The drop in underlying activity will be a more modest 2.0 percent, linked to investments in major ongoing field development projects.
The cost of an onshore field development project, not including drilling, is expected to decline by an average of 12 percent year-on-year in 2009, while the cost of an offshore project is expected to fall by a slightly higher 13 percent. The decline is led by falling raw material costs, as well as a decline in contractor margins, as oil and gas companies are pushing hard for lower prices.
The decline will be led by bulks, with OCTG and Line Pipe costs projected to fall by 39 and 30 percent respectively. This decline is again led by the sharp fall in raw material prices and a sharp drop in demand (in particular from North American markets) in combination with large inventories, which have eaten away at producer margins, according to ODS-Petrodata's Oliver Stephenson.
Similarly, margins are expected to fall sharply in the offshore construction vessels segment, linked to a large number of newbuilds combined with a slowdown in demand. We expect prices in these segments to decline by just over 20 percent year-on-year in 2009. Margins and prices in these segments are expected to continue to decline through 2010 before starting a recovery in 2011.
Onshore and offshore field development activity is expected to start recovering in 2010. However, future activity beyond this will be negatively affected by the current low level of new project sanctions.
MSS Cost Index annual changes:
- Onshore Project: + 18% (2007), + 9% (2008), - 12 % (2009e)
- Offshore Project: + 22% (2007), + 5 % (2008), - 13 % (2009e)ODS-Petrodata's MSS Cost Index for field development projects is updated regularly. The cost models are based on the trends of the underlying cost drivers of 22 market segments within the oil and gas service industry.
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For further information on the MSS Cost Index or ODS-Petrodata products visit our web pages www.ods-petrodata.com and www.msspoint.com. You may also contact Jens Petter Hamang, MSS Manager (jhamang@ods-petrodata.com / +47-2212-9067).
Contact:
Jens Petter Hamang, MSS Manager of ODS-Petrodata, +47-2212-9067,
jhamang@ods-petrodata.com