# Upstream Capital Costs Index (UCCI): What It is, How It Works

![Worker standing in an oil field](https://www.investopedia.com/thmb/nCpf9qOXtJwbSCyFM9LZMgLh5-s=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/UpstreamCapitalCostsIndex-41d74ada07b4402c93c815ec1b978ac6.jpg)

*— GoodLifeStudio / Getty Images*

## What Is the Upstream Capital Costs Index (UCCI)?

The Upstream Capital Costs Index (UCCI) is a proprietary metric index that tracks the [composite capital cost](https://www.investopedia.com/terms/c/composite-cost-of-capital.asp) of materials, facilities, equipment, and personnel for oil and natural gas producing projects. Cambridge Energy Research Associates (CERA), formerly owned by IHS Markit, merged with S&P Global in February 2022, which owns and manages the index.

### Key Takeaways

*   The Upstream Capital Costs Index (UCCI) tracks the composite capital cost of materials, facilities, equipment, and personnel for oil and natural gas producing projects.
*   Cambridge Energy Research Associates (CERA), formerly IHS Markit, now under S&P Global, owns and manages the UCCI.
*   The index works as a benchmarking tool for analysts, traders, and others interested in the oil and gas industry.

## Understanding the Upstream Capital Costs Index (UCCI)

S&P Global's Upstream Capital Costs Index (UCCI) offers a concise benchmarking tool for analysts, traders, and others interested in the oil and gas industry. Use of the index is helpful in tracking and forecasting the performance of the underlying oil and gas properties. 

The UCCI is only one of a family of indexes published by S&P Global, a global data, analytics, technology, and advisory firm. The company’s indexes include: 

*   Upstream Operating Costs Index (UOCI), which tracks the changing costs for oil and gas field operations
*   Downstream Capital Costs Index (DCCI), which tracks capital expenses for the construction of petroleum projects
*   North American Cost Index (NACI), which investigates the cost of producing oil and natural gas in North America
*   Upstream Innovation Index (UII), which tracks the cost of efficiency and design changes on a portfolio of projects

## Components of the UCCI

The 28 projects included in the UCCI represent a diversified portfolio of liquified natural gas (LNG), pipeline, onshore, and offshore projects in a range of geographic locations. The index looks at the changes to operating and capital costs over specific time frames.

Generally, oil and gas production separates into the [upstream](https://www.investopedia.com/terms/u/upstream.asp), midstream, and downstream stages. The upstream segment of operations involves [exploration and production](https://www.investopedia.com/terms/e/exploration-production-company.asp) (E&P) of oil and natural gas. Many large integrated oil companies combine upstream activities with midstream and downstream operations.

The composite cost of capital is a company's cost to finance its business and projects. The determination of this amount is known as the [weighted average cost of capital](https://www.investopedia.com/terms/w/wacc.asp) (WACC). The calculation involves multiplying the cost of each of the individual capital components by its proportional weight and then summing the results. A high composite cost of capital indicates that a company has high borrowing costs.

## History of the UCCI

Cambridge Energy Research Associates (CERA), established in 1983 in Cambridge, Massachusetts, focuses on energy research and consulting for the energy industry. The company has the distinction of being a leading authority on energy markets and related trends and statistics.

CERA serves as an advisory source for government departments and private companies. IHS Energy, a prominent source of information related to the oil and gas industry, acquired CERA in 2004. In 2009, the joint organization adopted the new blended name of IHS CERA, Inc. IHS CERA merged with S&P Global in February 2022.

## What Does "Upstream" Mean in the Oil and Gas Industry?

In extractive industries, "[upstream](https://www.investopedia.com/terms/u/upstream.asp)" refers to the earliest stages of operation, such as exploration, drilling, and mining. "Upstream costs" refer to the costs of drilling and pumping mineral resources before shipping them to the next stage of the production process.

## What Does "Downstream" Mean?

In extractive industries, "downstream" refers to the last stages of operation, just before products are sold to consumers. In petrochemical industries, this can include refining and transportation to the final destination.

## What Does "Midstream" Mean in the Oil and Gas Industry?

In extractive industries, "midstream" refers to intermediate operations between extracting and delivering final products to consumers. This includes piping and transportation operations between extraction points and refineries. It also includes processing plants that remove sulfur from raw natural gas and produce natural gas liquids.

## The Bottom Line

The Upstream Capital Costs Index (UCCI) measures the capital costs for businesses that extract oil and natural gas. It is part of a larger family of indexes published by S&P Global to evaluate the costs for companies in those industries.  

> **Article Sources**
>
> 1.  S&P Global. "[S&P Global Completes Merger with IHS Markit, Creating a Global Leader to Power the Markets of the Future](https://investor.spglobal.com/news-releases/news-details/2022/SP-Global-Completes-Merger-with-IHS-Markit-Creating-a-Global-Leader-to-Power-the-Markets-of-the-Future/)."
>     
> 2.  S&P Global. "[Costs and Supply Chain Indexes](https://www.spglobal.com/commodityinsights/en/ci/Info/cera/ihsindexes/index.html)."
>     
> 3.  S&P Global. "[About S&P Global Market Intelligence](https://www.spglobal.com/marketintelligence/en/about/)."
>     
> 4.  American Fuel & Petrochemical Manufacturers. "[Infographic: Downstream, Midstream and Upstream](https://www.afpm.org/newsroom/infographic/infographic-downstream-midstream-and-upstream)."
>     
> 5.  Business Development Bank of Canada. "[Weighted Average Cost of Capital](https://www.bdc.ca/en/articles-tools/entrepreneur-toolkit/templates-business-guides/glossary/weighted-average-cost-of-capital)."
>     
> 6.  CERAWeek. "[About CERAWeek](https://ceraweek.com/about/index.html)."
>     
> 7.  IHS Markit. "[History of IHS Markit](https://ihsmarkit.com/about/history.html)."
>     
> 8.  Rigzone. "[CERA Changes Name Under IHS Brand](https://www.rigzone.com/news/oil_gas/a/76361/cera_changes_name_under_ihs_brand/)."