[copious.abundance]

--> Financial Times <--

Oil industry lifted by falling costs
By Ed Crooks, Energy Editor
Last updated: January 12 2009 23:32

Costs in the oil and gas industry have begun to fall for the first time this decade, bolstering the profits of companies hit by the steep drop in the price of crude.

The shift could add to pressure on oil prices, which had been supported by soaring production costs. Analysts have argued that those costs put a floor under the oil price, because if the price fell below production cost, projects would be cancelled and oil supply would be cut.

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[GoghGoner]

Another quote from the same article. This fits in with what we were discussing with baker-hughes drilling declines and witnessed by Rockman and others in the oil patch. The capital costs are declining because nobody wants to produce NG at this time, the price of NG is going to have to jump before the capital costs start rising again. The price rise (and correlated capital cost rise) will happen or many of us will starve and freeze!

The pattern of the decline in global activity is uneven, with the US and Canada the worst-affected because of a slump in natural gas prices. But Kevin Norrish of Barclays Capital argued that output cuts from the Organisation of the Petroleum Ex­porting Countries and falling output from countries such as Russia and the UK would begin to reverse the decline in price.

“We think energy prices will go back up again in the second half of the year, which will mean the industry’s costs go back up again,” he said.