The Fraser Institute

The Fraser Institute

June 24, 2010 06:33 ET

The Fraser Institute: South Dakota Named Best Place in the World for Oil and Gas Investment; Colorado, Alaska Improve Rankings in Global Petroleum Survey

CALGARY, ALBERTA--(Marketwire - June 24, 2010) - South Dakota is the No. 1 place in the world for oil and gas investment, according to an international survey of petroleum executives and managers released today by the Fraser Institute, one of the world's leading free-market think-tanks.

South Dakota, which was ranked seventh out of 143 jurisdictions in 2009, vaulted into the No. 1 spot out of 133 jurisdictions included in the Fraser Institute's Global Petroleum Survey 2010.

Along with South Dakota, American states claimed eight of the top 10 spots this year: Texas (second), Illinois (third), Wyoming (fourth), Mississippi (sixth), Utah (seventh), Oklahoma (ninth), and Alabama (10th).

Austria, ranked fifth, is the only jurisdiction outside North America to make the top 10. Manitoba is the highest ranked Canadian jurisdiction, placing eighth.

The Global Petroleum Survey is administered each year to petroleum industry executives to help measure and rank the barriers to investment of oil- and gas-producing regions. The exploration and development budgets of participating companies totaled about $161 billion in 2009, representing more than 60 percent of global upstream expenditures last year.

"American states are perennial favorites for oil and gas investment because they offer the stability and clear, transparent regulatory framework that investors value most," said Gerry Angevine, Fraser Institute senior economist in the Global Resource Center and coordinator of the survey.

After being ranked as the worst state for oil and gas investment in 2009, Colorado showed signs of regaining investor's favor, vaulting to 61st in this year's survey from 81st last year.

"Colorado is improving its reputation among industry executives, but the state still has a long way to go. In 2007, the state was ranked No. 1 in the world, but environmental regulations introduced since then continue to discourage investors," Angevine said.

Alaska, which respondents ranked the third least attractive state for oil and gas investment in 2009, climbed to 68th from 78th this year, but respondents remain critical of Alaska's fiscal regime and environmental policy.

"Jurisdictions known for high royalty fees and tax rates, inadequate infrastructure, price controls, labor shortages, and uncertain environmental regulations are the places petroleum investors say they most want to avoid," Angevine said.

"Regions offering competitive tax and regulatory regimes, on the other hand, attract highly positive attention, fostering investment and economic benefits for years to come."

The survey, which was conducted before the recent oil spill in the U.S. Gulf of Mexico, shows that region in 11th place overall, up from 14th in 2009, and the most attractive of all the purely offshore regions ranked in the 2010 survey.

"Until now the U.S. Gulf of Mexico has been seen as having a relatively attractive regulatory climate. But if more stringent, and therefore costlier, regulatory requirements are imposed in the wake of the BP Deepwater Horizon oil leak, the U.S Gulf of Mexico is likely to lose ground to other jurisdictions in next year's survey," Angevine said.

New York is the worst ranked state, plummeting to 102nd after placing 29th last year. Respondents cited the increasing cost of regulatory compliance, as well as issues of regulatory duplication and inconsistency, as strong barriers to investment in New York.

"New restrictions on natural gas shale drilling, based on fears of water supply contamination, are also major deterrents to investment in New York," Angevine said.

Globally, three Australian jurisdictions (South Australia, Northern Territory, and Victoria) ranked in the top 20, along with New Zealand and 12 U.S. jurisdictions.

The lowest ranked jurisdictions are: Bolivia, Venezuela, Russia, Ukraine, Iran, Turkmenistan, Ecuador, Nigeria, Iraq, and Kazakhstan.

A total of 645 respondents completed the survey questionnaire this year, providing sufficient data to evaluate 133 jurisdictions.

The survey questionnaire sought the opinions of senior executives and managers on 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.

Follow the Fraser Institute on Twitter | Become a fan on Facebook

The Fraser Institute is an independent Canadian public policy research and educational organization with offices in Vancouver, Calgary, Toronto, and Montreal and ties to a global network of 75 think tanks. Its mission is to measure, study, and communicate the impact of competitive markets and government intervention on the welfare of individuals. To protect the Institute's independence, it does not accept grants from governments or contracts for research. Visit www.fraseramerica.org.

Contact Information