The short version.

• S&P Global (formerly IHS CERA) publishes a suite of oilfield cost indexes — the Upstream Capital Costs Index (UCCI) and Upstream Operating Costs Index (UOCI) for exploration and production, the Downstream Capital Costs Index (DCCI) for refining and petrochemicals, and the newer Upstream Innovation Index (UII), which isolates how much of a project's cost change comes from design and efficiency gains rather than market prices. Reported increases for the most recent period range from roughly 6.5% to 8% depending on the specific report and window cited.
• That cost inflation is happening at the same time global upstream capital spending is falling for a second consecutive year: an estimated $420 billion in 2025 (down 2.5% year-on-year, and roughly 30% below the $600 billion S&P Global says is needed annually for adequate exploration and field replacement), with a further 2–3% decline forecast for 2026 — more than 5% below 2024 levels — as sub-$60/barrel oil pushes operators, especially US shale independents, toward free cash flow and debt reduction over new drilling.
• Baker Hughes' international rig count put Asia-Pacific at 206 active rigs and the Middle East at 488 as of June 2026 — the two largest regions the count tracks outside North America. A thinner regional rig fleet means Asia's producers absorb the same global cost inflation with less drilling activity to spread it across.
• Breakeven costs vary sharply by source: Rystad Energy puts onshore Middle East around $27/barrel, offshore shelf around $37, offshore deepwater around $43, North American shale around $45, and oil sands $57 and up. A separate report puts India's domestic producers at roughly $35–45/barrel — competitive with deepwater and shale, though not with the cheapest Middle East onshore fields.
• India's own 12 listed oil and gas PSUs posted combined Q1 FY27 capex of ₹27,161 crore, down 3.8% from ₹28,242 crore in Q1 FY26 — the first year-on-year Q1 decline in at least five years, breaking a streak of 6–8% annual growth. ONGC's capex fell 16.7% and Indian Oil's fell 43%, both attributed to Brent volatility and shipping-insurance risk aversion tied to the West Asia conflict; experts describe the dip as a likely one-off rather than a trend reversal.

Five names, three jobs: what S&P Global's cost-index suite actually measures

S&P Global's Commodity Insights arm (the successor to Cambridge Energy Research Associates, or CERA, whose indexes IHS Markit managed for years before S&P Global's 2022 acquisition of IHS Markit folded them in) publishes a small family of indexes built specifically for the oil and gas industry's own version of the problem the Consumer Price Index solves for households: how much has it actually gotten more expensive to do the same thing this year versus last year, once you strip out simply doing more of it.

S&P Global's own materials also reference a North American Cost Index (NACI) as a regional variant focused on shale drilling and completion costs; this piece was not able to independently confirm a detailed, current methodology for NACI specifically (as distinct from the general UCCI/UOCI framework applied regionally), so it is named here for completeness but not treated as a separately verified data point.

The number that should be falling isn't

The intuitive expectation, going back to the 2014-16 oil price crash, is that when oil prices fall, industry activity falls, demand for rigs and steel and skilled labour falls with it, and project costs fall too — that is roughly what happened last time, with offshore shelf and deepwater project costs falling by an estimated 35% in the years after 2014 as the whole services market repriced downward. That isn't what's happening this cycle. S&P Global's reporting for the most recent period puts upstream capital cost inflation (UCCI) at around 8% in one report and roughly 6.5% year-on-year in another covering an overlapping but not identical window — the exact figure moves depending on which specific report and period is cited, but both point the same direction: costs kept climbing even as S&P Global's own price outlook calls for Brent averaging around $60/barrel in 2026, a genuinely soft price environment by the standard of the past decade.

Spending is falling for a second year running

Global upstream capital expenditure is estimated at $420 billion in 2025, a 2.5% decline from 2024 and, by S&P Global's own framing, roughly 30% short of the $600 billion the industry needs to spend annually just to replace reserves and maintain adequate future supply. The 2026 outlook calls for a further 2–3% year-on-year decline, which S&P Global frames as more than 5% below 2024 levels once both years of cuts are combined — the first back-to-back annual decline in global upstream investment in this data series. Combining the stated percentages: if 2025 spending of $420 billion represents a 2.5% cut from 2024, 2024 spending works out to roughly $431 billion; a further 2–3% cut in 2026 would put next year's spending at roughly $407–410 billion, consistent with the "more than 5% below 2024" framing S&P Global itself uses. The cuts are not evenly spread: they're concentrated in North America and Europe, led by US shale independents prioritising free cash flow and debt paydown over production growth, while national oil companies in the Middle East and operators in Africa and Latin America are, on the same reporting, increasing investment — Brazil, Guyana, and Argentina are all cited as sources of continued non-OPEC supply growth despite the aggregate spending pullback.

The $431bn 2024 figure and the $407-410bn 2026 range in the sentence above are this piece's own arithmetic from S&P Global's stated percentage changes, not directly quoted index figures — shown as a consistency check against the "more than 5% below 2024" framing, not as an independently sourced number in its own right.

The Asia angle: a thinner rig fleet absorbing the same cost inflation

Asia-Pacific's 206 active rigs against the Middle East's 488, per Baker Hughes' international rig count for June 2026, matters for a specific reason beyond regional pride of place: cost inflation of the kind UCCI and UOCI are showing hits hardest where drilling activity is already thin, because a smaller rig fleet has fewer active projects across which to spread the fixed costs of mobilising crews, equipment, and services in the first place. This piece was not able to obtain a country-level breakdown within Asia-Pacific (India, China, Indonesia, and Malaysia are the region's largest producers, but Baker Hughes' publicly reported figures for this period give only the regional total) — that gap is worth flagging rather than papering over with an estimate.

Where India's own economics sit on the cost curve

Rystad Energy's basin-level breakeven estimates put onshore Middle East production at roughly $27/barrel — the cheapest category tracked — against offshore shelf at roughly $37, offshore deepwater at roughly $43, North American shale at roughly $45, and oil sands at $57 and up (with a non-OPEC average across all of these cited around $47). Separately, reporting on India's own upstream sector puts domestic producers' breakeven costs at roughly $35–45/barrel, which this piece treats as a distinct, differently-sourced figure rather than a like-for-like addition to the Rystad set — the two weren't built on the same methodology or as part of the same study. Taken at face value, India's domestic economics land in the same range as offshore deepwater and North American shale: cheaper than oil sands, but nowhere near as cheap as Middle East onshore fields, which is a structural reason India's upstream sector will likely never out-compete Gulf producers on cost alone and instead has leaned on the energy-security case (reducing an import bill that still covers the large majority of India's crude consumption) rather than a pure cost argument.

One number worth flagging rather than reconciling: the report citing India's $35–45/barrel breakeven pairs it with an assumption of Brent stabilising at $75–85/barrel in 2026, while S&P Global's own 2026 outlook (cited above) projects Brent averaging closer to $60/barrel. That's a real, unresolved discrepancy between two different sources' forecasts for the same year, not a typo this piece is choosing to correct one way or the other — readers should treat any single-point 2026 Brent forecast cited anywhere, including in this article, as one analyst house's view rather than a settled figure.

India's own capex just showed the same squeeze

Twelve Indian oil and gas public-sector undertakings, spanning exploration and production, midstream gas transport, and refining and marketing, together spent ₹27,161 crore in Q1 FY27 (April–June 2026), a 3.8% decline from the ₹28,242 crore spent in the same quarter of FY26, according to provisional figures from the Petroleum Planning and Analysis Cell. That is, per contemporaneous reporting, the first year-on-year Q1 decline in at least five years, breaking a run of 6–8% annual growth that started from a Q1 FY22 base of ₹20,268 crore. The aggregate figure understates how uneven the pullback was at the company level: ONGC's capex fell 16.7% to ₹6,834 crore, Indian Oil's fell 43% to ₹3,626 crore, and Oil India's fell 16% to ₹2,139 crore. Reporting attributes the decline to Brent price volatility and elevated shipping-insurance costs tied to the escalation of the West Asia conflict during the April–June window, rather than to a structural change in investment appetite — and experts quoted in that reporting characterise the dip as a likely one-off. Oil India's own guidance points the same way: the company has said it plans to raise full-year exploration capex toward ₹10,000 crore, up from roughly ₹8,900 crore in FY26, which is not the posture of a company retrenching.

These are 12 PSUs accounting for over 60% of India's domestic oil and gas production, and their capex has historically run counter-cyclically to price — spending through downturns to protect long-term output. A quarter where that pattern broke, even briefly, is exactly the kind of data point that lines up with the global story above: real-world capital spending pulling back at the same moment S&P Global's cost indexes show the underlying activity getting structurally more expensive, a combination that squeezes future production capacity from both directions at once.

Sources and caveats