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Cost inflation is here: the battle between margins and cost discipline intensifies

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05 May 2022

Cost inflation is here: the battle between margins and cost discipline intensifies

Report summary

Global upstream cost inflation is intensifying. Coming into this year, we forecasted unit costs would rise 7-10%. We now expect like-for-like project costs to be up 15-20% in the Lower 48 and 10-18% for conventional offshore in 2022. Potential cost inflation in 2023 could reach the low double digits. In the Lower 48 we expect 15-20% inflation, driven by commodity prices and high utilisation of kit and services. Exposure depends on location and operation type, and pre-existing contracting agreements. We forecast 10-18% offshore project cost inflation in 2022. This is driven by raw materials inflation but will be compounded by capacity and supply constraints.

Table of contents

  • Executive summary
  • Cost inflation takes flight
  • Where is inflation today?
  • Lower 48 – commodity prices and lack of resources are driving cost inflation
  • Conventional offshore – long-lead-time kit demand and service costs on the rise
  • It’s an uncertain market. What are some possible outcomes?

Tables and charts

This report includes 5 images and tables including:

  • Lower 48 year-over-year cost inflation by category
  • Sector demand change over time
  • Sector supply change – 2013/2014 versus 2022
  • Global FPSO demand by procurement decision
  • Global average day rate by vessel category

What's included

This report contains:

  • Document

    Cost inflation is here: the battle between margins and cost discipline intensifies

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