The Fraser Institute

The Fraser Institute

June 27, 2011 06:32 ET

The Fraser Institute: Mississippi Ranked as World's Most Attractive Spot for Oil and Gas Investment, U.S. Gulf of Mexico's Score Plummets in Global Petroleum Survey

CALGARY, ALBERTA--(Marketwire - June 27, 2011) - Mississippi is ranked as the top place in the world for oil and gas investment, according to the opinions of international petroleum executives and managers in the annual Global Petroleum Survey, released today by the Fraser Institute, one of the world's leading free-market think-tanks.

Mississippi, which was ranked sixth out of 133 jurisdictions in 2010, vaulted into the No. 1 spot out of 136 jurisdictions included in the Fraser Institute's Global Petroleum Survey 2011.

Along with Mississippi, American states dominated the top 10, with Ohio finishing second overall, followed by Kansas (third), Oklahoma (fourth), Texas (fifth), West Virginia (sixth), Alabama (eighth), and North Dakota (10th).

Netherlands–North Sea and Hungary—ranked seventh and ninth, respectively—are the only jurisdictions outside North America to crack the top 10. The province of Saskatchewan is the highest-ranked Canadian jurisdiction, finishing 11th overall.

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. A total of 502 respondents completed the survey questionnaire this year, providing sufficient data to evaluate 136 jurisdictions. The exploration and development budgets of participating companies account for more than 60 per cent of the annual spending on petroleum exploration and production among international oil companies.

"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 co-ordinator of the survey.

The survey also shows the U.S. Offshore–Gulf of Mexico experiencing one of the largest drops in the rankings, plummeting to 60th place overall after finishing 11th in the 2010 survey, which was conducted before the Deepwater Horizon oil leak.

"The decline isn't surprising, given the greater difficulty of obtaining drilling permits in the wake of the BP disaster," Angevine said.

Several other U.S. jurisdictions also earned poor scores for environmental regulations and associated uncertainties. U.S. Pacific–Offshore was ranked 101st overall, the worst among the 23 American jurisdictions included in this year's survey, after finishing 103rd last year. California was the lowest-ranked state, dropping to 91st from 87th in 2010.

"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, plummeted to 83rd overall from 68th in 2010. Survey respondents remain critical of Alaska's fiscal regime, environmental regulations, and land claims issues.

"Jurisdictions with reputations for political instability and corruption, steep royalty fees and tax rates, inadequate infrastructure, price controls, and labour shortages have difficulty attracting investment," Angevine said.

"To attract investment, petroleum-producing regions must offer investors competitive tax regimes and regulatory certainty."

Globally, the top 10 most attractive jurisdictions in this year's survey are: Mississippi, Ohio, Kansas, Oklahoma, Texas, West Virginia, Netherlands–North Sea, Alabama, Hungary, and North Dakota.

The least attractive jurisdictions are: Venezuela, Ecuador, Bolivia, Iran, Kazakhstan, Uzbekistan, Democratic Republic of Congo (Kinshasa), Iraq, Libya, and Russia.

Jurisdictions which experienced remarkable declines in their relative attractiveness for investment this year include the Philippines, Canada's Northwest Territories, Uganda, Brunei, Uruguay, Angola, the Democratic Republic of the Congo (Kinshasa), Cameroon, Equatorial Guinea, and the U.S. Offshore–Alaska.

In Uganda, unexpected changes to the taxation system signalled the government's lack of commitment to maintaining a stable policy environment. This was a key factor underlying the sharp drop in Uganda's ranking, which fell to 123rd this year from 94th in 2010.

Also near the bottom of the list, the Democratic Republic of the Congo (Kinshasa) saw its ranking plummet to 130th, down from 106th last year.

"The arbitrary revocation of exploration rights from one company, and their transfer to another party, likely shattered whatever trust would-be investors may have had in Kinshasa and its ability to administer petroleum industry regulations fairly," Angevine said.

The survey questionnaire sought the opinions of senior executives and managers on a range of issues, including royalties and other forms of petroleum production tax, taxation in general, the cost of regulatory compliance, trade and labor regulations, legal system fairness and transparency, and political stability, among others.

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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

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