Upstream oil and gas capital costs declined in the first nine months of this year, but this likely precedes another move upward, according to consultancy IHS.

The cost of building upstream oil and gas facilities dipped slightly – by less than 1% – between the first and third quarters of 2013, representing the first decline since the first quarter of 2010, according to IHS’ Upstream Capital Costs Index. Market fundamentals, including weak rig demand and falling steel prices, drove the decline.

The cost of operating upstream facilities, on the other hand, rose by about 1% over the same period, according to IHS’ Upstream Operating Costs Index. Labor costs across all skill levels were the primary driver of higher operating costs, more than offsetting falling prices for materials such as proppant and tubing.

“While it is now much easier than it was a few years ago to procure pumping equipment and proppant, it is still harder than ever to find qualified, technical professionals who can hit the ground running on projects,” said David Vaucher, a director at IHS and head of operational costs research.

And the leveling off of costs in the first three quarters of this year is unlikely to be sustained in 2014, according to Pritesh Patel, IHS Senior Director and head of upstream costs research. “While line pipe and tubular goods costs have fallen and equipment costs have shown little movement in the past six months, these trends are likely to change in 2014 and we could potentially see large increases by the end of next year,” Patel said.

IHS predicts that upstream investment will remain slow in the fourth quarter of this year, but that momentum will pick up with the start of new budgeting and spending cycles next year.