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Gulf of Mexico Plunges in Ranks of Attractive Investments

In the wake of the Macondo well blowout in the Gulf of Mexico (GOM), the region has become significantly less attractive for gas and oil investment , according to the Fraser Institute's Global Petroleum Survey 2011 of energy executives.

The public policy firm, which had ranked the U.S. GOM 14th based on a stable energy policy, royalties and rules in its 2009 survey and 11th in the last survey conducted before the GOM oil spill (see Daily GPI, June 25, 2010), now ranks the GOM 60th overall.

"The decline isn't surprising, given the greater difficulty of obtaining drilling permits in the wake of the BP disaster," said Gerry Angevine, a senior economist in the institute's Global Resource Center.

"Industry executives stress that long-term energy policy stability, low royalties and clear regulatory frameworks are their top priorities when choosing where to invest," Angevine said.

Respondents placed U.S. states in eight of the top 10 positions in the survey. Mississippi was ranked first among 136 jurisdictions, with Ohio second, Kansas third, Oklahoma fourth, Texas fifth, West Virginia sixth, Alabama eighth and North Dakota ninth. Netherlands-North Sea, the highest ranking overseas region in the international survey, was ranked seventh overall, and Hungary rounded out the top ten in the ninth position. Only four of the jurisdictions -- Mississippi, Oklahoma, Texas, and Alabama -- were also among the top 10 jurisdictions worldwide in 2010. All four were also among the top 10 in 2009.

South Dakota, which was ranked No. 1 in the Fraser survey last year, was not included in the 2011 survey due to insufficient data.

The survey is distributed each year to petroleum industry executives to measure and rank the barriers to investment in oil- and gas-producing regions, Fraser said. The exploration and development budgets of participating companies totaled about $300 billion in 2010.

Offshore-Pacific was given the worst ranking among U.S. jurisdictions, though it moved up two positions to 101 from 103 last year, and California was the lowest ranking state, falling to 91st from 87th in 2010.

Saskatchewan overtook Manitoba as the No. 1 place in Canada for oil and gas investment, but it fell just short of finishing among the top 10 jurisdictions globally, ranking 11th overall. Last year Saskatchewan placed second in Canada and 17th in the world out of 133 jurisdictions.

The lowest ranked jurisdictions in the 2011 survey were Russia, Libya, Iraq, Democratic Republic of the Congo, Uzbekistan, Kazakstan, Iran, Bolivia, Ecuador and Venezuela.

A total of 502 respondents completed the survey questionnaire this year, providing sufficient data to evaluate 136 jurisdictions, said the institute. The survey questionnaire asked senior executives and managers about a range of issues, including royalties and licensing agreements, taxation, the cost of regulatory compliance, trade and labor regulations, legal process and political stability, among others.

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