Fraser Institute: Global Petroleum Survey 2009

COMMENT: Big deal. Another report from the Fraser Institute doing what it can to undermine the legitimacy of elected governments which are involved in anything that profit-seeking corporations sniff out - education, health, petroleum production and processing.

The complete report is available here.

Gerry Angevine
Fraser Institute
June 24, 2009

Manitoba now seen as best bet in Canada for oil and gas investment; Alberta continues to lose ground

CALGARY, AB—Manitoba has dethroned both Saskatchewan and Alberta as the most attractive Canadian province or territory for oil and gas investment, according to an international survey of petroleum executives and managers released today by independent research organization the Fraser Institute.

Saskatchewan, which was the top province in 2008, drops to the number two spot in Canada. But investors are most critical of Alberta, ranking the province as the least attractive among Canada provinces ranked for oil and gas investment. Aside from Manitoba and Saskatchewan, Alberta now also trails Nova Scotia, Ontario, Quebec, British Columbia, and Newfoundland and Labrador.

The results are contained in the Institute's Global Petroleum Survey 2009.

“The survey results clearly show the industry’s dissatisfaction with the Alberta government’s misguided policies. Punitive royalty rates, a lack of consultation, and a growing anti-energy bias are common complaints about the Stelmach government,” said Gerry Angevine, Fraser Institute senior economist and coordinator of the annual petroleum survey.

“Meanwhile, Manitoba has quietly encouraged oil and gas investment with low royalties and an easy to understand regulatory framework.”

While the survey shows a reordering among Canada’s provinces, it also shows Canada losing ground on a global scale.

Manitoba, the highest ranked province in 2009, is 21st internationally. Saskatchewan fell from 10th (of 81) in 2008 to 38th (of 143) worldwide. Nova Scotia ranked 54th, Ontario ranked 60th, Quebec 68th, British Columbia 71st, Newfoundland and Labrador 82nd, and Alberta 92nd.

Alberta’s poor showing puts the province behind China, the Philippines, and Brazil as an attractive place to invest in upstream oil and gas development.

Canada’s three territories also dropped sharply in this year’s survey. The Yukon fell to 105th (of 143) from 31st (of 81); the Northwest Territories dropped to 120th from 65th, and Nunavut is ranked 121st. Nunavut was not ranked in 2008.

“The main issue for the territories seems to be uncertainty around land claims issues and too many overlapping regulatory agencies,” Angevine said.

“You can see these issues reflected in the stalled MacKenzie Valley pipeline development in the Northwest Territories.”

The top 10 most attractive jurisdictions for investment in this year’s survey are: Arkansas, Alabama, Kansas, Austria, Mississippi, Nebraska, South Dakota, Texas, Oklahoma, and Indiana.

Jurisdictions receiving the highest number of negative comments are: Bolivia, Niger, Venezuela, Ecuador, Sudan, Russia, Bangladesh, Nigeria, Kazakhstan, and Ethiopia.

“Petroleum executives responding to the survey say they turn to different jurisdictions when confronted with high royalty fees and tax rates, inadequate infrastructure, price controls, and labor shortages,” Angevine said.

“They prefer to avoid jurisdictions with costly and time-consuming regulations. Other factors being equal, competitive tax and regulatory regimes can attract investment and generate substantial economic benefits. Policy makers should recognize that overly strident regulations and anti-energy sentiment can be costly in terms of lost revenue and jobs.”

The Global Petroleum Survey 2009 is designed to help measure and rank the investment climate of 143 oil and gas producing regions.

A total of 577 respondents completed the survey questionnaire this year, providing sufficient data to evaluate 143 jurisdictions. This is a substantial increase from the 2008 survey, in which 81 jurisdictions were rated, and the inaugural 2007 survey, in which 54 jurisdictions were rated.

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.

Media contact(s):
Gerry Angevine
gerry.angevine@fraserinstitute.org
(403) 216-7175 ext.224

The Fraser Institute: Global Petroleum Industry Views Arkansas as Best Place in the World for Investment; Colorado Drops to 81st

CALGARY, Alberta--(BUSINESS WIRE)--Arkansas is the new top dog for oil and gas investment, according to an international survey of petroleum executives and managers released today by independent research organization the Fraser Institute.

Arkansas, which was ranked third out of 81 jurisdictions in 2008, leapfrogged Alabama into the number one spot out of 143 jurisdictions ranked in the 2009 edition of the Fraser Institute’s Global Petroleum Survey 2009. The survey is available as a free PDF from the Fraser Institute web site at www.fraseramerica.org.

Along with Arkansas, U.S. states claimed nine of the top 10 spots in this year’s survey as follows: Alabama, Kansas, Mississippi, Nebraska, South Dakota, Texas, Oklahoma, and Indiana.

Austria, in fourth spot, is the only non-American jurisdiction to crack the top 10.

The Global Petroleum Survey 2009 is administered each year to petroleum executives to help measure and rank the barriers to investment of 143 oil and gas producing regions.

“The dominance of U.S. states as favorable jurisdictions for oil and gas development once again shows how the industry values stability and a clear and transparent regulatory environment,” said Gerry Angevine, Fraser Institute senior economist and coordinator of the annual petroleum survey.

But some states where the oil and gas industry has played a significant economic role are being viewed with increasing skepticism by the industry these days.

Colorado’s ranking has plummeted to 81st out of 143 jurisdictions and worst among all U.S. states included in the survey. In 2008 Colorado ranked 61st out 81 and in 2007, it was number one in the rankings.

“In recent years, Colorado legislators have introduced a swath of new environmental regulations for the petroleum industry. Now, the industry views Colorado as the worst state for investment and companies are looking to other areas,” Angevine said.

California and Alaska, which ranked 79th and 78th overall (second and third worst among U.S. states), have both joined Colorado in introducing extensive new environmental regulations. Alaska also raised oil production taxes last year.

“Investors prefer to avoid jurisdictions with high royalty rates and costly and time-consuming regulations. Other factors being equal, competitive tax and regulatory regimes can attract investment and generate substantial economic benefits,” Angevine said.

“Policy makers should recognize that overly strident regulations and anti-energy sentiment can be costly in terms of lost revenue and jobs.”

Globally, the Australian state of South Australia, the Netherlands-North Sea, and Namibia all ranked in the top 20, along with Austria and 16 U.S. jurisdictions.

Jurisdictions receiving the highest number of negative comments and generally viewed as the worst nations for oil and gas investment are: Bolivia, Niger, Venezuela, Ecuador, Sudan, Russia, Bangladesh, Nigeria, Kazakhstan, and Ethiopia.

A total of 577 respondents completed the survey questionnaire this year, providing sufficient data to evaluate 143 jurisdictions. This is a substantial increase from the 2008 survey, in which 81 jurisdictions were rated, and the inaugural 2007 survey, in which 54 jurisdictions were rated.

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, and political stability among others.

The Fraser Institute is an independent research and educational organization with locations across North America and partnerships in more than 70 countries. 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

Survey ranks Alberta last for energy investment

Think-tank says Manitoba tops in Canada

Alberta has slipped to the back of the pack as least attractive province for oil and gas companies to invest, the Fraser Institute said Wednesday. Photograph by: David Boily/AFP/Getty Images

CALGARY - Alberta has slipped to the back of the pack as least attractive province for oil and gas companies to invest, the Fraser Institute said Wednesday.

In fact, Manitoba ranks ahead of Alberta, Saskatchewan and British Columbia, according to the results of the right-wing think-tank's annual Global Petroleum Survey.

Saskatchewan, which was the top province in 2008, drops to No. 2.Aside from Manitoba and Saskatchewan, Alberta now also trails Nova Scotia, Ontario, Quebec, British Columbia, and Newfoundland and Labrador.

Gerry Angevine, the institute's chief economist and study author, said the results show that the once vaunted "Alberta Advantage" is a distant memory when it comes to oil and gas.

"On the basis of what we've heard from respondents to the survey, Alberta has no advantage in terms of the attractiveness of investing in the upstream," he said.

Angevine credited the Alberta government's decision to unilaterally raise royalty rates over the protestations of industry along with the uncertainty created by subsequent revisions to the program for eroding investor confidence.

"They're finding out now that they're not competitive with other jurisdictions in Canada. The government needs to take a hard look at what its done, and the implications of that, and not continue to keep its head in the sand."

Alberta's poor showing puts the province behind China, the Philippines and Brazil as attractive investment destinations for oil and gas.

The survey sought the opinions of senior executives and managers on a range of issues including royalties and licensing agreements, taxation, regulatory compliance, trade and labour regulations and political stability.

Although it ranked highly in terms of geopolitical security, Alberta ranked 130 out of 143 jurisdictions for its fiscal terms. By contrast, Manitoba ranked 21st, ahead of Michigan, but behind Tunisia.

Steve VanSickle, Farborne Energy's president and CEO, said Manitoba has an "expeditious" attitude that encourages oil and gas development. Fairborne is the third-largest driller in the province behind Canadian Natural Resources.

"Relationships with oil and gas companies are viewed as a partnership," he said. "We are extremely pleased, both with the government's perspective and how good it is to get things done."

Gary Leach, the executive director of the Small Explorers and Producer's Association of Canada, said he isn't surprised by Alberta's fall from grace. "I think our own analysis has indicated for some time that Alberta has slipped down the rankings over the last few years. Our view is that a worthwhile goal for Alberta should be to become the number one destination for investment in North America. That should be our goal if we want a solid economic future in this province."

Nine of one of the top 10 most attractive jurisdictions for investment in this year's survey are in the United States: Arkansas, Alabama, Kansas, Mississippi, Nebraska, South Dakota, Texas, Oklahoma, and Indiana. Jurisdictions receiving the highest number of negative comments are Bolivia, Niger, Venezuela, Ecuador, Sudan, Russia, Bangladesh, Nigeria, Kazakhstan and Ethiopia.

But Alberta's politicians aren't ready to give up the field to its global and homegrown competitors.

Speaking in Calgary Wednesday, Premier Ed Stelmach said the government will offer new incentives to stem the flow of drilling dollars out of Alberta into neighbouring provinces like Saskatchewan and B. C. Government sources indicate Energy Minister Mel Knight will on Thursday extend temporary royalty breaks on natural gas drilling that were slated to end in March.

Stelmach suggested Wednesday that the incentives will improve Alberta's appeal to investors and producers.

"With the announcements that will be made towards the end of this week, that report quite frankly is going to be old news," the premier said.

He noted the energy department is doing a competitiveness review of conventional oil and gas, comparing Alberta's regulations, land practices and royalty scheme. Results of the joint government-industry are expected in the fall.

"The amount of energy we produce is still outstanding. We do have the world's second-largest reserves. We've done a lot of work on the environmental side," Stelmach said in response to the Fraser report.

Meanwhile, B. C. Energy Minister Blair Lekstrom was in Calgary Wednesday to promote what his province has to offer in terms of drilling services at an industry trade show sponsored by the province.

Lekstrom said his province has engaged in "friendly competition" with neighbouring provinces like Alberta to attract investment dollars when designing its various incentive and royalty schemes.

Prospects for rapid development of B. C.'s massive Horn River shale gas resources got a big boost last week after producers including ExxonMobil ponied up $176 million for drilling rights in the extreme northeast corner of the province. It was the largest land sale in any province this year, eclipsing Alberta's full-year tally of about $100 million for both conventional and oilsands rights.

"Our goal was to create an environment where the private sector wants to invest their capital. This capital is mobile, it can go anywhere in the world. We don't compete, and Alberta doesn't compete with British Columbia directly and we don't compete with Alberta directly, we all compete in a global environment and we learn from each other every day."

spolczer@theherald. nwest.com

© Copyright (c) The Calgary Herald

Report critical of Alaska's relationship with oil industry

FAIRBANKS — Taxes, royalty rates and environmental regulations in Alaska make oil and gas companies reluctant to invest in exploration and production, according to the 2009 Global Petroleum Report.

The Fraser Institute, a Canadian think-tank, issued the third-annual study on June 24.

Although nine U.S. states ranked in the top 10 among international jurisdictions studied, Alaska did not. Instead, Alaska lodged in the 78th spot. Off-shore Alaska, which is subject to federal taxes and rules, ranked 72nd.

About 80 percent of the state’s income is derived from oil and gas.

Fraser Institute economist and a study author Gerry Angevine said the preponderance of U.S. states in the top 20 jurisdictions demonstrates how much the industry values stability and a clear and transparent regulatory environment.

Alaska’s ranks fell in 2008 compared to 2007, which the authors attributed to increasingly costly fiscal terms and tax rates — factors which continue to affect the state’s position. The state’s 78th position overall probably isn’t encouraging to investors, Angevine said.

“I’d say there are a whole bunch of other places I would consider,” he said. “It’s a totally competitive environment.”

“Generally speaking,” he said, “Australia, other U.S. states, they look a lot more attractive than Alaska, and some of the European countries as well.”

Gov. Sarah Palin’s intergovernmental coordinator Joe Balash said the study affirms Alaska is right where it ought to be.

“We have tough terms; we set the bar high,” he said. “But you know what? We have world-class resources. Arkansas and Mississippi don’t.”

Environmental rules and the costs of regulatory compliance drug Alaska down in overall ranking. While those factors may be a deterrent to oil and gas companies, they protect Alaska, Balash pointed out.

“I don’t think anyone in Alaska is going to apologize for protecting our environment,” he said, adding there may be room to streamline some state processes to encourage development. “But we’re not going to compromise our standards.”

The report ranks 143 states, countries and areas, such as off-shore locations, based on survey responses from 577 petroleum industry executives on how 16 factors encourage or deter investment.

Alaska ranked 67th in fiscal terms, a catchphrase being used increasingly as North Slope producers considering committing gas to one of several proposed natural gas pipelines say they may seek better terms from the state, which insists terms are adequate.

The state scored among the worst of U.S. jurisdictions in the cost of regulatory compliance, and it earned poor marks in environmental regulations. Fiscal terms proved a mild deterrent to investment, and regulatory uncertainty was a mild to strong deterrent. Local public infrastructure was a mild to strong deterrent, although the state does have a plan to remedy access to oil, gas and mineral projects, Balash said.

A compilation of comments by jurisdiction shows only one for Alaska: “Notoriously corrupt government. Essentially a Third World country.”

Alaska Oil and Gas Association executive director Marilyn Crockett said Alaska’s results raise some concern.

“Alaska continues to slip in the overall ranking of attractiveness for industry investments,” she said. “That is not where the state needs to be.”

The study results echo a refrain from companies in Alaska.

“It’s consistent with industry’s message over the last several years about the challenges we face in conducting business here,” Crockett said.

The study evaluated factors which governments control, she noted, and not other factors, such as the general costs of doing business. Alaska slips again there, she said, with its remote location and expensive transportation costs. She said the same factors will weigh in as companies decide whether to build a large-diameter natural gas pipeline, or a smaller, instate line.

Crockett said the state is proactive in focusing environmental and other regulations and permitting for oil and gas and mineral development.

“We certainly applaud the state for those efforts,” she said. “There is some room for additional streamlining and coordination in terms of environmental and regulatory provisions. Any efforts the state could make to streamline some of those processes would go a very long way to increasing the ranking.”

Local natural gas prices also drew down Alaska’s position among the jurisdictions surveyed — but that’s nothing new, Balash said, especially in Cook Inlet where companies are shying from new exploration to feed a fairly small market with limited growth potential.

“It appears to be affecting investment and, ultimately, deliverability,” Balash said. “It is something we need to be paying attention to.”

The study methodology ranks jurisdictions based on composite scores on 16 factors, as awarded anonymously by 276 oil and gas industry respondents representing 276 companies. The exploration and development budgets of those companies was about $200 billion in 2008.