Refinery and Petrochemical Plant Construction Costs Falling

According to IHS Cambridge Energy Research Associates, the cost of building new refineries and petrochemical plants fell 9 percent between the third quarter of 2008 and the second quarter of 2009, after several years of steady and significant increases. According to IHS, the cost decline we've seen so far is mostly due to the reduced cost of commodities. Costs are expected to fall further due to factors such as reduced workload with the major contractors. My view is that this is a mixed blessing. Clearly for the contractors, the fact that order books are weaker is bad news. For manufacturers, inflation in this area has been running at very high rates, making capital investment very expensive and has led to a need for scope reductions in projects in order to meet budgets. The end of this bubble should make things easier at a time when spending is being cut due to the impacts of recession