Marilyn Radler
Senior Editor-
Economics
Mississippi is the world's most attractive place in the world for oil and gas investment, according to a new survey.
The Fraser Institute, a Calgary-based think tank, last week released its annual Global Petroleum Survey, which asks the opinions of international petroleum executives and managers.
In last year's survey, Mississippi ranked No. 6 among 133 jurisdictions. The 2011 survey considered 136 locales, and the results put seven other US states among the top 10 places for oil and gas investment.
The survey shows the US offshore Gulf of Mexico experiencing one of the largest declines in the rankings, plummeting to No. 60 overall after finishing at No. 11 in the 2010 survey, which was conducted before the Macondo oil spill.
The survey
This is Fraser Institute's fifth annual survey regarding barriers to investment in upstream oil and gas E&P worldwide. The survey responses rank provinces, states, and countries according to the extent of the investment barriers which, as identified by the survey respondents, include high tax rates, costly regulatory schemes, and security threats.
A total of 502 respondents representing 478 companies completed the survey this year, providing enough data to evaluate 136 jurisdictions. The exploration and development budgets of these participating companies totaled about $300 billion in 2010, which represents more than 60% of global upstream expenditures last year.
The jurisdictions were assigned scores for each of 17 factors that affect investment decisions, and the scores are based on the proportion of negative responses a jurisdiction received. The greater the proportion of negative responses for a jurisdiction, the greater were its perceived investment barriers and, therefore, the lower its ranking.
The rankings
Ranking second in this year's survey is Ohio, followed by Kansas, Oklahoma, Texas, West Virginia, the Netherlands North Sea, Alabama, Hungary, and North Dakota.
"By offering clear, stable regulatory and fiscal terms relative to other jurisdictions, many American states have cemented themselves as global favorites for oil and gas investment," said Gerry Angevine, Fraser Institute senior economist in the Global Resource Center and the survey's coordinator.
Regarding the decline in the ranking of the Gulf of Mexico, Angevine said, "The decline isn't surprising, given the greater difficulty of obtaining drilling permits in the wake of the BP disaster."
Several other US jurisdictions also earned poor scores in the survey for environmental regulations and associated uncertainties. The US offshore Pacific was ranked No. 101 overall, the worst among the 23 US jurisdictions included this year, after finishing No. 103 last year. California was the lowest-ranked state, falling to No. 91 from No. 87.
Survey respondents pointed to California's complex environmental restrictions and lengthy wait times to attain drilling approvals as highly unattractive, Angevine said.
Alaska, which respondents ranked as the second-least attractive state this year, fell to No. 83 overall from No. 68 a year ago. Survey respondents remain critical of Alaska's fiscal regime, environmental regulations, and land-claims issues.
Angevine noted that jurisdictions with reputations for political instability and corruption, steep royalty fees and tax rates, inadequate infrastructure, price controls, and labor shortages have difficulty attracting investment.
"To attract investment, petroleum-producing regions must offer investors competitive tax regimes and regulatory certainty," Angevine said.
The survey found that the world's least attractive jurisdictions are Venezuela, Ecuador, Bolivia, Iran, Kazakhstan, Uzbekistan, Congo (former Zaire), Iraq, Libya, and Russia.
Jurisdictions experiencing large declines in their relative attractiveness for investment this year include the Philippines, Canada's Northwest Territories, Uganda, Brunei, Uruguay, Angola, Congo (Brazzaville), Cameroon, and Equatorial Guinea.
In Uganda, unexpected changes to the taxation system signaled the government's lack of commitment to maintaining a stable policy environment. This was a key factor underlying the drop in Uganda's ranking to No. 123 this year from No. 94.
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