Oklahoma best for E&P investment

Oklahoma, the 46th state admitted into the US, ranks 20th in size, 28th in population, 36th in population density, and 45th in median household income, according to various online listings. But it’s in first place this year as the top spot for oil and gas investment worldwide in the 6th annual global survey by the Calgary-based Fraser Institute think-tank that looked at 147 jurisdictions around the world.

“Oklahoma is the best place on earth for oil and gas investment, according to international petroleum executives and managers,” the institute said. That’s up from 4th place in last year’s survey and is likely why Oklahoma also is reported to have the 9th fastest-growing state economy in the US, having regained nearly a third of the jobs lost in the Great Recession.

US states dominated the institute’s top 10 rankings this year, with Mississippi in 2nd place (down from first last year), Texas, 3rd (up from 5th), North Dakota, 4th (up from 10th), New Mexico, 7th (huge leap from 41st), Kansas, 8th (down from 3rd), and West Virginia, 10th (down from 6th). “Through safe and sensible petroleum development, these states are paving the way for a prosperous future for Americans and their families and creating jobs right now,” said Gerry Angevine, Fraser Institute’s senior economist and coordinator of the survey. “Their tax, regulatory, and labor terms are clear, consistent, and competitive. They are in a great position to attract and reap economic benefits from petroleum investment, including the development of shale gas and tight oil resources through the application of hydraulic fracing technology.”

The only regions outside the US that ranked among the top 10 were Canada’s Manitoba province, 5th; The Netherlands, 6th; and Denmark, 9th. Ohio fell to 14th place this year from 2nd in 2011 because of increased concerns about the cost of complying with state regulations, uncertainty over environmental regulations, and the interpretation and administration of regulations, said institute officials.

Several states improved their scores this year. California jumped to 45th place from 91st, the lowest of any state in 2011, with improved scores on questions pertaining to fiscal terms, taxation, labor availability, and regulatory issues. Other large gainers include New Mexico, which vaulted to 7th from 41st; Colorado, 16th from 53rd; and Pennsylvania, 34th from 65th. The lowest-ranked states this year were Alaska, 61st, and New York, 68th.

The US sector of the Gulf of Mexico climbed to 26th after plummeting to 60th place last year in the wake of government reaction to the Macondo blowout in 2010. “Respondents indicated that they are now less concerned about regulatory duplication and uncertainty in the gulf,” the institute reported.

Rankings were based on responses of 623 petroleum industry executives from 529 companies who evaluated 18 factors that affect their investment decisions. “The…budgets of participating companies account for more than 50% of the annual spending on petroleum exploration and production among international oil companies,” institute officials said.

Worst investments

The 10 least-attractive jurisdictions for investment (starting with the worst) were Bolivia, Venezuela, Iran, Russia’s Eastern Siberia, Libya, Ecuador, Uzbekistan, Argentina’s Santa Cruz province, Iraq, and the rest of Russia except for the offshore Arctic and offshore Sakhalin. All but Santa Cruz were among the 10 least-attractive areas for oil and gas investment in 2011 too, although Russia was not divided into subregions in that survey.

Barriers to investment increased in several jurisdictions this year with the greatest deterioration in Chile, Santa Cruz, New Brunswick, Argentina’s Salta province, Bahrain, Uruguay, and Ivory Coast. “New Brunswick’s poor performance is due to explorers’ concern with the manner in which petroleum industry regulations are being administered, uncertainty over the nature of the environmental regulations that will apply, and threats by antidevelopment activists,” officials reported.

“Political upheaval that occurred in the Middle East and North Africa during 2011, and which continues in some jurisdictions (such as Syria), appears to have discouraged survey respondents from investing in the Arab world. In the 2011 survey, Bahrain was viewed as the most attractive for oil and gas of all Arab states that were ranked, except Qatar. But in this year's survey, Bahrain is seen as posing greater barriers to investment than Oman, Tunisia, Morocco, Kuwait, and Lebanon. The change in Bahrain's relative attractiveness, and that of some other Arab states that have been subject to unrest, is a reflection of increasing concerns over political stability and security in the region,” they said.

(Online July 30, 2012; author's e-mail: samf@ogjonline.com)

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