CALGARY, AB—Saskatchewan has overtaken Manitoba as the No. 1 place in Canada for oil and gas investment, based on the opinions of petroleum executives and managers in the annual Global Petroleum Survey, released today by the Fraser Institute, Canada’s leading public policy think-tank.
But Saskatchewan fell just short of finishing among the top 10 jurisdictions globally, ranking 11th overall in the survey of 136 jurisdictions. Last year, it placed second in Canada and 17th in the world, out of 133 jurisdictions.
“Saskatchewan understands the petroleum industry and how important it is to maintaining a prosperous economy,” said Gerry Angevine, Fraser Institute senior economist in the Global Resource Centre and co-author of the Global Petroleum Survey 2011.
“Industry executives stress that long-term energy policy stability, low royalties, and clear regulatory frameworks are their top priorities when choosing where to invest. Saskatchewan offers investors confidence in each of these areas.”
This year, Manitoba fell to second place among Canadian provinces and territories. Ontario maintained a third-place finish, while Nova Scotia moved up to fourth from seventh. Newfoundland and Labrador remained in fifth place.
Alberta saw its score improve, moving up to sixth place among Canadian jurisdictions after finishing eighth in 2010. Globally, the province ranked 51st out of 136, compared to 60th out of 133 jurisdictions last year.
“Alberta earned better marks for fiscal terms following the special drilling incentives that were announced in May last year, after the 2010 survey had been completed,” Angevine said.
“But investors remain concerned about regulatory uncertainty in Alberta, especially with regard to environmental regulations, and the cost of regulatory compliance.”
British Columbia dropped to eighth place among the provinces and territories after finishing sixth last year. The deterioration in BC’s ranking resulted from poor scores for regulatory uncertainty, cost of compliance, and environmental regulations. The province’s score on the “taxation in general” question also deteriorated.
“British Columbia has the dubious distinction of ranking among the least attractive jurisdictions in the world in terms of land claims issues,” Angevine said.
Among the remaining Canadian jurisdictions, New Brunswick is ranked seventh and Quebec ninth. The Northwest Territories came in last nationwide, in 10th place.
Nationally, the biggest jump occurred in Nova Scotia, which vaulted to 34th (of 136) from 53rd (of 133) while Ontario rose to 25th from 28th. The biggest decline occurred in the Northwest Territories, which fell to 103rd from 74th. Manitoba dropped to 12th from eighth, BC to 69th from 52nd, and Quebec to 92nd from 77th. Newfoundland and Labrador remained in 50th place this year while New Brunswick, which was not included in the 2010 survey, came in 59th place.
The top 10 most attractive jurisdictions in the world for investment 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.
The U.S. Offshore–Gulf of Mexico experienced one of the largest drops in the global 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.
Jurisdictions which experienced remarkable declines in their relative attractiveness for investment this year include the Philippines, 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 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 Global Petroleum Survey 2011 is designed to help measure and rank the investment climate of oil- and gas-producing regions around the world.
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.
“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.
“Petroleum-producing regions must offer investors competitive tax regimes and regulatory certainty.”
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.