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S&P Global Commodity Insights Upstream Capital and Operating
Cost indices for the First-quarter 2022 see increases across the
board, with costs expected to rise to over 8% by the end of
2022.
The Upstream Capital Costs Index (UCCI) increased by 2.8% and
Upstream Operating Costs Index (UOCI) grew by 3% and quarter on
quarter (q/q).
Increases were driven by rising raw material prices and
continuing supply/demand disruption, which fed through into steel
products, equipment, and chemicals. We expect that the cost
escalation will continue through the year, with the UOCI ending
2022 up 8% and UCCI up 8.6%.
The most significant market movements for the Q1 2022
include:
The steel market increased by 8.9% over the first quarter 2022.
Input costs were up, and supply limitations contributed to rising
steel prices.
The subsea market increased by 3.1% over first quarter 2022.
High inflation and rising raw material prices accounted for a
significant portion of the subsea market escalation.
The offshore installation vessel market increased by 2.7% over
first quarter 2022. The offshore vessel market rebounded owing to
higher oil prices and a sustained operator preference for high-end
vessels
The operations index gained 4% during first quarter 2022,
driven by a 7% escalation in the diesel index, as Brent prices rose
30% in the quarter. As oilfield activity recovered, encouraged by
high crude oil prices, the labor rates edged up 1% in US dollar
terms during the quarter but rose 4% in local currency because of
the Commonwealth of Independent States (CIS) currencies' strong
depreciation. The operations index is expected to rise 11% in
2022.
The maintenance index grew by 4% in first quarter 2022 in US
dollar terms and is forecast to end the year up by 7%. Overall
maintenance demand is rebounding, supported by higher oil prices
and the easing of COVID-19-related restrictions in some regions.
The facilities inspection and maintenance (FIM) index escalation
continued into the first quarter of 2022 with 4% growth. The index
will face pressure from rising labor costs coupled with higher
steel and bulk materials prices.
The logistics index gained 1% q/q but is expected to end the
year up by 8%. Supply chain disruptions, particularly in trucking,
will push the index higher through the year.
The wells index registered 4% higher during first quarter 2022
in US dollar terms, while increasing by 11% compared with the same
quarter in 2021. The oilfield service sector continues to face
major input cost inflation, driven by steel, chemical additives,
fuel, trucking, logistics, and labor costs, all of which will push
the wells index higher this year.
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This blog is an extract from two reports. The full reports First quarter 2022 UCCI and UOCI market review are
available for S&P Global Commodity Insights Connect platform
subscribers only. For more information contact James Blanchard.
***
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