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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.
ODS-Petrodata is committed to delivering high-quality market
intelligence, data, publications and analysis tools to the upstream
oil and gas industry. We emphasise the virtues of quality, timely
delivery and perceptive analysis in support of your efforts to
understand complex markets.
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