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The Cost Of Drilling Continues To Rise

1. Price of Drilling Continues to Edge Higher Despite Cheaper Raw Materials

- According to IHS Markit, the average cost of developing upstream oil and gas assets rose by another 1.8% in Q3 2022 as high industry activity is squeezing availability.

- Most of the drilling appreciation came from the land and offshore rig markets, up by 11% and 12%, respectively, with land rig prices ballooning throughout most of this year.

- Whilst steel prices have decreased globally recently, pipe prices have barely fallen as steel mills are attempting to hold onto elevated margins for pipe as demand remains extremely robust.

- The overall inflation of upstream costs is expected to hit 12% this year as high oil and gas prices keep activity high, with 2023 expected to see another 5% cost inflation.

2. Power Generation Will Need to Triple to Meet Hydrogen Needs

- According to Bloomberg, the production of hydrogen will become the main source of electricity demand by 2050, roughly equivalent to 23 000 TWh, surpassing the construction sector and industry.

- Buoyed by the proliferation of solar and wind generation for green hydrogen, the energy requirements of hydrogen production by 2050 will be equal to the world’s total electricity demand right now.

- UK oil major BP (NYSE:BP) recently announced blue and green hydrogen will become a foundation stone of its low-carbon business, revamping most its remaining refineries that currently…

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