Escalation

The persistently sharp contrast between expensive oil and cheap gas has had dramatic effects on Western Canadian drilling, boosting activity and accelerating a trend to targeting oil rather than gas.

The costs of building and operating upstream oil and gas facilities fell drastically in Q1 2009 after a prolonged period of escalation. Since then they have hit bottom and were beginning to show signs of an upward trend at the end of Q1 2010, according to indexes developed by IHS Cambridge Energy Research Associates (IHS CERA).

The costs to build and operate upstream oil and gas facilities, which fell early this year following a long period of escalation, appear to have bottomed, according to IHS Cambridge Energy Research Associates (IHS CERA).

The costs to build and operate upstream oil and gas facilities, which fell early this year following a long period of escalation, appear to have bottomed, according to IHS Cambridge Energy Research Associates (IHS CERA).

Natural gas futures jumped higher Wednesday afternoon in sympathy with a similar rise in the petroleum complex, which was sparked by an escalation of turmoil in Nigeria and U.S. refinery outages. After putting in a low of $6.560 in morning trade, June natural gas took off higher in the afternoon to record a high of $6.920 before closing at $6.900, up 31.9 cents on the day.

FERC Chairman James J. Hoecker has signaled that the Commissionis investigating the causes for the rapid escalation in natural gasprices in California and elsewhere in the nation.

Any attempt by Congress to re-regulate natural gas prices to putan end to the escalation in wholesale prices seen this year wouldbe a “mistake,” said FERC Chairman James Hoecker, even though hebelieves $4 gas is too high.

Chevron says it will appeal a recent preliminary ruling by theState of Florida against its development of the Destin Dome 56Unit, about 25 miles offshore from Pensacola, FL.