Oil Industry Costs Weakening After Hitting Record-CERA

LONDON -(Dow Jones)- Oil and natural gas drilling costs around the world are starting to weaken amid the global economic downturn after hitting a record level in the past six months, according to Cambridge Energy Research Associates.

In a report, obtained by Dow Jones Newswires, the U.S. energy consultants said the fallout of the global economic crisis, with all energy and metal commodity prices tumbling in recent months, had already started pressuring drilling and construction costs.


“The effects of the recession and the credit freeze will likely change the picture considerably in the months ahead,” CERA chairman Daniel Yergin said in a summary of the report. Costs had already started to moderate in early October, the report indicated.

Many companies in recent weeks have put a host of expensive drilling and refining projects on hold in order to capitalize on falling costs. The announced delays have unnerved some industry analysts about the health of future oil and crude-product supplies once global economic activity rebounds.

CERA said continued high activity levels and tightness in the oil exploration services and equipment markets pushed its upstream cost index to 230 points in the past six months from a previous high of 210.

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