Upstream Capital Costs Index (UCCI)

Key takeaways
* The Upstream Capital Costs Index (UCCI) is a proprietary benchmark that tracks composite capital costs for oil and natural gas production projects.
* It measures costs of materials, facilities, equipment, and personnel across a diversified project portfolio and is maintained by S&P Global.
* Analysts and market participants use the UCCI to benchmark project costs, monitor trends, and help forecast project economics.

What the UCCI is

The UCCI is a composite index that quantifies capital costs associated with upstream oil and gas projects. It aggregates changes in spending on materials, construction, equipment, and labor across a representative set of projects (including LNG, pipeline, onshore, and offshore developments) to provide a single, comparable measure of capital-cost trends.

Who manages it

The index was developed by Cambridge Energy Research Associates (CERA) and is now owned and published by S&P Global.

What the index measures

• Scope: Capital expenditures for exploration and production (the upstream segment).
• Coverage: A diversified portfolio of projects (typically many tens of projects spanning LNG, pipeline, onshore, and offshore) that together reflect global upstream capital-cost trends.
• Components: Costs of materials, facilities, equipment, and personnel that drive project capital budgets.
• Output: Composite movements in capital costs over time that act as a benchmark for industry cost inflation or deflation.

Industry context: upstream, midstream, downstream

• Upstream — exploration and production activities (drilling, well construction, extraction). The UCCI focuses on this segment.
• Midstream — transportation, storage, and processing between production and refinement (pipelines, processing plants).
• Downstream — refining, distribution, and delivery of finished petroleum products to markets.

How the UCCI is used

• Benchmarking: Compare a project’s or company’s capital budget against industry cost trends.
• Forecasting: Incorporate cost trends into project economics, planning, and risk assessments.
• Market analysis: Track sector-wide pressures on capital expenditures that affect project viability and investment decisions.

Related S&P Global cost indexes

S&P Global publishes a family of related indexes that cover other cost dimensions in the oil and gas value chain:
* Upstream Operating Costs Index (UOCI) — tracks operating costs for field operations.
* Downstream Capital Costs Index (DCCI) — measures capital costs for petroleum construction projects.
* North American Cost Index (NACI) — monitors costs specific to producing oil and gas in North America.
* Upstream Innovation Index (UII) — tracks the cost impact of design and efficiency changes across projects.

Key concept: composite cost of capital (WACC)

The UCCI concerns capital spending, which interacts with a company’s cost of capital. The weighted average cost of capital (WACC) combines the costs of debt and equity, weighted by their proportions in the capital structure. Higher capital costs and rising UCCI values can increase financing pressure on upstream projects.

Brief history

CERA, founded in the early 1980s, developed energy-market research and cost indexes used by industry and governments. The organization later became part of IHS, and the combined entity (IHS CERA) was integrated into S&P Global, which now manages the UCCI and related indexes.

Bottom line

The UCCI is a practical industry benchmark for tracking capital-cost trends in upstream oil and gas projects. It helps analysts, project managers, and investors assess how changes in material, labor, and construction costs affect project economics and sector-wide capital expenditure pressures.