Upstream Capital Cost Index
Oil and gas investment
The upstream capital cost index (UCCI) is an economic indicator that measures the changes in the costs of producing upstream petroleum products, such as crude oil and natural gas. It considers the prices of labor, materials, and equipment used in the exploration, production, and transportation of these resources. The UCCI is often used by energy policymakers and investors to track the health of the energy industry and make informed decisions about investments and production levels. The values are indexed to the year 2000, meaning that a piece of equipment that cost $100 in 2000 would cost $230 in 2009 and $167 in 2016.
When the upstream capital cost index (UCCI) goes up, it indicates that the costs associated with producing upstream crude oil and natural gas, have increased. This can be due to a rise in the prices of labor, materials, or equipment used in the exploration, production, and transportation of these resources. An increase in the UCCI suggests that it is becoming more expensive to produce these energy resources, which may impact the profitability of energy companies and influence decisions related to investment and production levels. For example, from 2006, the UCCI increased until 2009 due to drilling rig rates, especially for deepwater projects, technology limits, and skill requirements. After 2020, the UCCI increased driven by rising raw material prices, steel, equipment and chemicals. In addition, to rising maintenance costs, wells,
Conversely, when the UCCI goes down, it indicates that the costs of producing petroleum have decreased. This could result from a decrease in the prices of labor, materials, or equipment. A decrease in the UCCI suggests that it is becoming less expensive to produce oil and gas, potentially improving the profitability of energy companies and possibly leading to increased investment and production activities. For example, in 2015 and 2016 the UCCI decreased due to several factors including excess supply from the USA that was the driver behind the oil price fall which forced the majority of oil producers to cut capital and operating costs.
