Rigzone - Oil Exploration & Production Costs Up 53% In Past Two Years

[hatrack]

EDIT

Starting with 100 as the base in 2000, the index rose gradually to 103.9 in 2002, 105.8 in 2003 and 109.5 in 2004. But in 2005 it shot up to 126 and reached 148 by last November. Part of the rise was a reaction to high oil and natural gas prices that started in 2003, which led companies to move forward with more projects, increasing the cost of industry-specific items like drilling rigs and subsea equipment.

But the global economic boom, lead by China, created a demand for other goods and services, such as steel, engineering and construction labor, which led to higher prices for those items. This "double bubble" of cost increases is unprecedented, Ward said, and doesn't show any sign of letting up soon.

In the past year, the largest increase came in the cost of leasing offshore drilling rigs, which rose 309.2 percent. Rig contractors are expected to expand their fleets by more than 100 in the next four years, but rates likely won't ease until 2009.

Rates for offshore equipment installation vessels, such as heavy-lift cranes that lay undersea pipelines, rose 41 percent in the last year. And rates for engineering and project management staff have grown 23 percent, despite an increase in new design centers in Asia and the Middle East, where labor costs are cheaper. For now, the index will come out twice a year, in May and November, but already there's pressure for it to come out quarterly, Ward said.

EDIT

Yeah, I know, It's CERA . . .

http://www.rigzone.com/news/article.asp?a_id=41201

[gasperc]

1. hmmm...file that under holy fucking shit

this coincides with the the Cato insitute lauding the industry for their huge profits that can be used for more exploration and more and cheaper oil. Yet, by the end of the report they bemoan Exxon-mobil for plowing over half of their profit back into their own fucking stock and spending little on exploration. Now we know why, the costs are sky rocketing and the return is deminishing. The price will equalize $100-$200 barrel whatever it takes to bring the shit to market but hopefully well before that, people will start demanding and switching to more fuel efficient vehicles.
But, without a doubt watch the government provide tax breaks to the "strugglin oil industry" so that the economy can get back on track.

[Ezlivin]

2. Do they WANT to invest in oil exploration when they know it's fruitless?

Regardless of what dreck they give the PR department to tell us proletariats, they know damned well about Peak Oil and its ramifications. They also know it doesn't make much sense to plow money back into a losing proposition.

[phantom power]

3. Hmm. gasperc's post above suggests they *do* know the score.

They're making soothing noises to keep the cattle happy, meanwhile they are quietly cashing out and saddling up their fastest horses in back of the saloon.

Sorry, I had some kind of flashback to "Tombstone" there.

[gulfcoastliberal]

4. When they're out drilling down miles of water off the continental shelf

If that hugely expensive endeavor is now economically feasible - we know we're past peak. Thunderhorse and those other billion dollar+ deep water wells means we're pretty desperate to find and suck all remaining oil pockets, ASAP with cost nor complexity being no object.