Foreign direct investment (FDI) in the domestic petroleum and natural gas industry rose at an astonishing rate of nearly 80% to $93 billion in 2000, outpacing the rate of growth of U.S. producers’ investments overseas for the first time in a decade.

But that year was something of an aberration, said Energy Information Administration (EIA) analyst Neal Davis, adding that the pace “has certainly slowed” since then. The FDI stake in the U.S. power industry is comparatively smaller, the agency noted, but is growing quickly.

The large percentage hike in FDI ownership of U.S. oil and gas in 2000 was attributed to several major acquisitions that year, notably BP Amoco’s purchase of Atlantic Richfield Co. for $27.2 billion and Anadarko Petroleum’s (in 2000 Anadarko was 10% owned by the Algerian Sonatrach) acquisition of Union Pacific Resources, according to an EIA annual report, which was released Aug. 9. The FDI share of petroleum and gas that year grew 51 percentage points faster than did the overall FDI position in the U.S. economy, which was “an unprecedented event in recent history,” it noted. The United Kingdom contributed to most of the FDI growth in the sector in 2000.

The EIA defined foreign direct investment as ownership or control of at least 10% of a U.S. company or asset by a foreign entity.

While overall production by FDI affiliates was down 4% in 2000 on a barrels of oil equivalent (BOE) basis, natural gas production rose nearly 18% to 2,462 Bcf in that year, according to the Department of Energy (DOE) agency. BP and Shell Oil were “far and away” the largest producers of oil and gas among FDI affiliate companies, contributing 87% to the BOE production of FDI affiliates in 2000.

Capital spending (including exploration and development expenditures) by oil and gas FDI affiliate companies rose 42% in 2000, with most of the increase driven by upstream acquisitions, the agency reported noted.

Compared to oil and gas, the electric power industry’s share of total foreign investment in the United States remains small (at 19% in 2000), but the EIA says it is growing rapidly.

The FDI share of the power sector rose in 1999-2000 largely due to Scottish Power’s (United Kingdom) purchase of PacifiCorp for $10.9 billion, Powergen’s (United Kingdom) acquisition of LG&E Energy for $5.4 billion, and Orion Power Holdings/Mitsubishi’s purchase of $1.8 billion of generation assets from Duquesne Light. The PacifiCorp transaction alone pushed the FDI position in the U.S. power sector to $29 billion in 1999 from $2.7 billion. At the end of 2000, FDI affiliates’ power generation capacity was 3.3% of total U.S. capacity, of which more than two-thirds was attributed to PacifiCorp and LG&E Energy, the EIA said.

As for U.S. direct investment abroad (DIA), the EIA said the domestic producers primarily poured their money into the foreign upstream segment of the industry in 2000. It estimated the U.S. DIA share of oil and gas extraction exclusively was $66 billion, which was almost two-thirds of domestic producers’ total investment of $105.5 billion in foreign petroleum and gas activities. Foreign countries with the biggest DIA positions in oil and gas were the United Kingdom and Canada.

In 2000, the FDI share of the U.S. petroleum and gas sector grew at a faster clip than did the domestic DIA position in foreign oil and gas, largely on the strength of BP Amoco’s acquisition of Arco and Vastar Gas. This reversed a nearly decade-long trend in which the growth in the DIA position in foreign oil and gas outstripped the growth in the FDI share of U.S. oil and gas, the EIA said.

©Copyright 2002 Intelligence Press Inc. Allrights reserved. The preceding news report may not be republishedor redistributed, in whole or in part, in any form, without priorwritten consent of Intelligence Press, Inc.