CALGARY, AB—Manitoba is the best place in Canada for oil and gas investment, based on the opinions of petroleum executives and managers who participated in the annual Global Petroleum Survey released today by the Fraser Institute, Canada’s leading public policy think-tank.
Saskatchewan slipped to No. 2 among Canadian provinces and territories after ranking as the top Canadian jurisdiction in 2011 while Alberta climbed to third from sixth in the Global Petroleum Survey 2012.
"The Prairies offer the clearest, most consistent, and most competitive policies for oil and gas investment in Canada," said Gerry Angevine, Fraser Institute senior economist in the Global Resource Centre and co-author of the survey.
"Through safe and sensible petroleum development, these provinces are paving the way for a prosperous future for Canadians and their families."
While Saskatchewan outperformed Manitoba in some important areas (e.g., fiscal terms), Manitoba’s improved scores on questions pertaining to taxation in general, the cost of regulatory compliance, and uncertainty over environmental regulation propelled the province to the top of the Canadian rankings.
Globally, Manitoba ranked fifth out of 147 jurisdictions included in the survey, up from 12th (of 135) in 2011, while Saskatchewan fell to 13th from 11th.
Alberta vaulted to 21st from 51st overall, mainly because of improved scores on questions pertaining to the regulatory climate. This suggests that respondents approve of the plan government announced in May 2011 to simplify regulatory processes and procedures with respect to oil and gas drilling permits, project development, and site remediation.
"Two years ago, Alberta ranked 60th in the world for oil and gas investment, the result of what the industry saw as an unexpected royalty grab by the provincial government. Today, investors say they are less concerned about regulatory uncertainty, the cost of regulatory compliance, and regulatory duplication and inconsistency," Angevine said.
British Columbia was ranked the fifth most-attractive Canadian jurisdiction, up from eighth in 2011, while Newfoundland and Labrador dropped to sixth from fifth. The Yukon, which was not ranked last year, finished seventh, the Northwest Territories rose to eighth from 10th, and Quebec’s ranking was static at ninth.
New Brunswick tumbled to 10th place from seventh to become the worst-ranked province in this year’s survey. New Brunswick’s poor showing is related to the manner in which regulations governing exploration and development of shale gas resources are being administered and uncertainty over the environmental regulations that will apply to a shale gas industry.
"To top it off, concerns over anti-development activism in New Brunswick have increased since a company pursuing shale gas activities was vandalized last summer," Angevine said.
Canadian jurisdictions mostly fared well in the international rankings of 147 jurisdictions. Aside from Manitoba, Saskatchewan, and Alberta, Nova Scotia ranked 35th (down from 34th), British Columbia 39th (up from 69th), Newfoundland and Labrador 47th (up from 50th), the Yukon 58th (not ranked last year), and the Northwest Territories 60th (up from 103rd). But Quebec at 101st (down from 92nd) and New Brunswick at 102nd (down from 59th) appear relatively unattractive for investment compared to the rest of Canada and a large majority of jurisdictions worldwide. Their poor performance appears to reflect the manner in which policies in relation to potential shale gas development are being handled.
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 623 respondents representing 529 companies completed the survey questionnaire this year, providing sufficient data to evaluate 147 jurisdictions. The exploration and development budgets of participating companies account for more than 50 per cent of the annual spending on petroleum exploration and production among international oil companies.
Globally, the top 10 most attractive jurisdictions in this year’s survey are: Oklahoma, Mississippi, Texas, North Dakota, Manitoba, Netherlands, New Mexico, Kansas, Denmark, and West Virginia.
The 10 least attractive jurisdictions are: Bolivia, Venezuela, Iran, Russia–Eastern Siberia, Libya, Ecuador, Uzbekistan, Argentina–Santa Cruz, Iraq, and Russia–other.
The political upheaval that occurred in the Middle East and North Africa during 2011, and which continues in some jurisdictions (such as Syria), appears to have discouraged survey respondents from investing in the Arab world. In the 2011 survey, Bahrain was viewed as the most attractive for oil and gas of all Arab states that were ranked except Qatar. But in this year’s survey, Bahrain is seen as posing greater barriers to investment than Oman, Tunisia, Morocco, Kuwait, and Lebanon. The change in Bahrain’s relative attractiveness, and that of some other Arab states that have been subject to unrest, is a reflection of increasing concerns over political stability and security in the region.
A relatively large share (25 per cent or more) of respondents indicated that exploration and development activity in South Sudan, Democratic Republic of the Congo (Kinshasa), Bolivia, Somaliland, Uruguay, Iran, Cyprus, Quebec, Libya, Brazil–Pre-salt Offshore, Nigeria, and New Brunswick would likely increase by more than 100 per cent if governments adopted "best practices." The survey respondents suggest that activity could potentially be boosted the most in Kazakhstan, Cambodia, India, Russia–other, Turkey, Iran, Albania, Bolivia, Papua New Guinea, Venezuela, Ukraine, Vietnam, Nigeria, Indonesia, Myanmar, Russia–Eastern Siberia, Mozambique, and Guatemala.
"Investors say they will continue to turn away from jurisdictions with onerous fiscal regimes, political instability, land claim disputes, and corruption," Angevine said.
"Similarly, investors prefer to avoid jurisdictions with costly, time-consuming, and uncertain regulations."
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 labour regulations, legal system fairness and transparency, and political stability, among others.