Table of Contents
- What Is the Upstream Capital Costs Index (UCCI)?
- Key Takeaways
- Understanding the Upstream Capital Costs Index (UCCI)
- Components of the UCCI
- History of the UCCI
- What Does 'Upstream' Mean in the Oil and Gas Industry?
- What Does 'Downstream' Mean?
- What Does 'Midstream' Mean in the Oil and Gas Industry?
- The Bottom Line
What Is the Upstream Capital Costs Index (UCCI)?
Let me explain the Upstream Capital Costs Index, or UCCI, directly to you. It's a proprietary metric that tracks the overall capital costs involved in oil and natural gas production projects, covering materials, facilities, equipment, and personnel. This index comes from Cambridge Energy Research Associates, or CERA, which was once part of IHS Markit and merged with S&P Global in February 2022—now they own and manage it.
Key Takeaways
You should know that the UCCI specifically monitors those composite costs for oil and gas projects. It's owned by S&P Global through their acquisition of CERA and IHS Markit. Think of it as an essential benchmarking tool if you're an analyst, trader, or anyone tracking the oil and gas sector.
Understanding the Upstream Capital Costs Index (UCCI)
When I look at S&P Global's UCCI, I see it as a straightforward benchmarking resource for anyone in the oil and gas world, like analysts or traders. You can use it to track and predict how oil and gas properties are performing. Remember, this is just one index in S&P Global's lineup—they're a major player in data, analytics, technology, and advisory services for the energy industry.
Family of Indexes from S&P Global
- Upstream Operating Costs Index (UOCI), which follows changing costs for oil and gas field operations.
- Downstream Capital Costs Index (DCCI), tracking capital expenses for building petroleum projects.
- North American Cost Index (NACI), examining costs of oil and natural gas production in North America.
- Upstream Innovation Index (UII), monitoring costs related to efficiency and design changes across projects.
Components of the UCCI
The UCCI draws from 28 diverse projects, including liquefied natural gas (LNG), pipelines, onshore, and offshore operations in various locations. It examines changes in operating and capital costs over set periods. In the oil and gas industry, operations divide into upstream, midstream, and downstream stages. Upstream focuses on exploration and production (E&P), and many big oil companies integrate this with midstream and downstream work. The composite cost of capital here is basically a company's financing cost for its business and projects—calculated as the weighted average cost of capital (WACC) by weighting and summing individual components. A high WACC means higher borrowing costs for the company.
History of the UCCI
Cambridge Energy Research Associates (CERA) started in 1983 in Cambridge, Massachusetts, specializing in energy research and consulting. They're known as a top authority on energy markets, trends, and stats. CERA advises governments and private firms. In 2004, IHS Energy acquired them, and by 2009, they became IHS CERA, Inc. The latest merger was with S&P Global in February 2022.
What Does 'Upstream' Mean in the Oil and Gas Industry?
In extractive industries like oil and gas, 'upstream' covers the initial stages: exploration, drilling, and mining. Upstream costs are what you spend on drilling and pumping resources before moving them to the next phase.
What Does 'Downstream' Mean?
Downstream refers to the final stages right before products reach consumers. In petrochemicals, this includes refining and transporting to the end point.
What Does 'Midstream' Mean in the Oil and Gas Industry?
Midstream handles the middle operations between extraction and delivery. This means piping, transportation from extraction sites to refineries, and processing like removing sulfur from natural gas or producing natural gas liquids.
The Bottom Line
To wrap this up, the UCCI measures capital costs for companies extracting oil and natural gas. It's one of several indexes from S&P Global designed to assess costs in these industries—use it if you need solid data for analysis.
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