Project costs in the upstream oil and gas sector are expected to fall by up to 24% this year, mainly on lower raw material costs, a consultant said Monday.
However, costs may rebound as much as 10% in 2010 as commodities and oil prices are expected to recover next year, said Oliver Stephenson, lead market analyst at ODS-Petrodata.
"The decline (forecast for this year) is led by falling raw material costs as well as declining margins," he said.
Prices of base metals such as steel, aluminium and nickel have fallen to long-term historical averages from last year's highs, he said.
Stephenson also projects a drop this year of 20%-25% in new project approvals in the sector.
However, the decline mainly reflects reduced activities at small- and medium-sized companies, in Russia, and in drilling in North America, he said.
He didn't provide cost and project figures.