The Fraser Institute

The Fraser Institute

June 26, 2008 06:00 ET

The Fraser Institute: International Survey Confirms Petroleum Industry Views Saskatchewan as Better Bet Than Alberta for Upstream Oil and Gas Investment

CALGARY, ALBERTA--(Marketwire - June 26, 2008) - Saskatchewan is now the jewel of Canada's oil patch, surpassing Alberta as the preferred choice for upstream oil and gas investment, according to an international survey of petroleum executives released today by independent research organization the Fraser Institute.

The Global Petroleum Survey 2008, ranked Saskatchewan as the sixth most favourable jurisdiction out of 81 in terms of having low barriers to upstream oil and gas investment. Alberta was ranked 29th while British Columbia ranked 19th. Saskatchewan is the only Canadian province ranked among the top 10 jurisdictions.

The Global Petroleum Survey 2008 can be downloaded as a free pdf from the Fraser Institute web site at www.fraserinstitute.org.

"This year's survey results and the poor showing for Alberta can be traced directly to the Alberta government's decision to grab a larger share of oil and gas royalties," said Gerry Angevine, Fraser Institute senior economist and coordinator of the annual petroleum survey.

"By comparison, Saskatchewan offers a model of stability and a skilled work force right next door to Alberta."

The 2008 survey shows an increasing gap between how Alberta and Saskatchewan are viewed by the petroleum industry. Last year, the survey ranked Saskatchewan 15th and Alberta 18th in terms of low barriers to upstream oil and gas investment.

Angevine said Alberta is facing a similar predicament as Newfoundland and Labrador did in last year's survey where it was ranked as the 10th worst place for petroleum investment, putting it in the same league as Russia, Iran and Pakistan. Newfoundland's low ranking was attributed to an ongoing battle between petroleum companies and Premier Danny Williams who wanted to gain an equity position for the province in the Hebron oil project.

Although Newfoundland and Labrador improved in this year's survey, it still ranked poorly compared to all other provinces.

"Oil and gas projects require vast amounts of capital and long lead times. If governments are inclined to change the rules part way through the process, the risk for investors increases and they are more likely to seek a more stable jurisdiction for investment," Angevine said.

The Northwest Territories ranked worst among all Canadian regions: 13th worst out of 81 jurisdictions. (The Northwest Territories ranked 21st worst of 54 in 2007.) Survey respondents cited regulatory costs and aboriginal land claims as barriers to investment.

Nine of the top 10 jurisdictions ranked as most favourable for investment are in the US: Arizona, Arkansas, Oklahoma, Alabama, Ohio, Texas, US Offshore, Kansas, and New York State.

Internationally, Bolivia was ranked as the worst country for petroleum investment and development, followed by Ecuador and Venezuela. Chad, Iraq, Nigeria, Argentina, Sudan and Russia round out the group of nations considered to be the least favourable for investment in oil and gas exploration.

In most cases, jurisdictions that have imposed heavier tax and regulatory burdens during the past year received higher percentages of negative responses and therefore worse rankings than in 2007.

"Policy makers would do well to recognize the consequences and weigh the costs of big government in terms of foregone investment, lost jobs, and corporate flight," Angevine said.

Modeled after the popular Fraser Institute Survey of Mining Companies, the Global Petroleum Survey 2008 is designed to help measure and rank the investment climate of 81 oil and gas producing regions.

A total of 396 respondents participated in this year's survey. Companies represented in the survey account for more than one-third of the industry's global spending on petroleum exploration and production worldwide.

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 labour regulations, and political stability among others.

The Fraser Institute is an independent research and educational organization with offices in Calgary, Montreal, Toronto, and Vancouver. 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.fraserinstitute.org.

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