This verdict has just been reinforced by the Fraser Institute's 2010 Global Petroleum Survey. A total of 645 different petroleum industry executives and managers provided input regarding barriers to investment in oil and gas exploration and production in various jurisdictions around the world. According to the 151-page report, jurisdictions within North America, Europe, Australia, and New Zealand generally received the best rankings. Specifically, the 10 most attractive jurisdictions for investment, based on the All-Inclusive Composite Index, are South Dakota, Texas, Illinois, Wyoming, Austria, Mississippi, Utah, Manitoba, Oklahoma and Alabama. Illinois, Wyoming, Manitoba, and Utah are newcomers to the top 10. A total of 133 jurisdictions were evaluated.
On the other hand, the 10 least attractive jurisdictions for investment are Bolivia (socialist), Venezuela (socialist), Russia, Ukraine, Iran (Islamofascist), Turkmenistan, Ecuador (socialist), Nigeria (Third World kleptocracy), Iraq (post-war chaos), and Kazakhstan. Note how many socialist countries actually deter investment.
The All-Inclusive Composite Index is derived from scores for each of 17 factors considered to affect investment decisions. The 17 factors are listed at the bottom of this post, available after the jump. For each of the 17 factors, respondents were asked to select from five possible responses the one best describing each jurisdiction they were familiar with:
(1). Encourages investment
(2). Is not a deterrent to investment
(3). Is a mild deterrent to investment
(4). Is a strong deterrent to investment
(5). Would not invest due to this criterion
Beginning on Table 1, page 14, you can see how the jurisdictions were ranked in the All-Inclusive Composite Index. Utah is now ranked the seventh-best place in the world for Big Oil to do business, up from 13th in 2009. Beginning on page 16 are a series of graphs showing not only the rankings in the All-Inclusive Index, but also in each of the 17 indices which make up the All-Inclusive Index. Utah ranks among the best is nearly all areas, with the following exceptions:
(1). Environmental Regulations (see Figure 24): While Utah ranks among the best in this area, what few environmental regulations comparatively exist are perceived by Big Oil as being a strong deterrent to investment.
(2). Uncertainty Concerning Protected Areas (see Figure 27): Utah's only poor area; state ranks in the bottom half. This indicates the legislature needs to better define this issue.
(3). Labor Regulations and Employment Agreements (see Figure 30): While Utah ranks among the best in this area, what regulations and agreements exist are perceived by Big Oil as being a strong deterrent to investment.
Beginning on page 80, percentage responses by the individual respondents are available.
The Bottom Line: Utah offers one of the friendliest investment climates for Big Oil of all jurisdictions. The only issue needing further resolution is Uncertainty Concerning Protected Areas.
Seventeen factors affecting investment decisions:
1. Fiscal terms — government requirements pertaining to royalty payments, production shares, and licensing fees.
2. Taxation regime — the tax burden (other than for oil production), including personal, corporate, payroll, and capital taxes, and complexity of tax compliance.
3. Uncertainty concerning the basis for and/or anticipated changes to environmental regulations.
4. Uncertainty regarding the administration, interpretation, and enforcement of existing regulations and concern with the frequency of changes to regulations.
5. Cost of regulatory compliance — refiling permit applications, participating in hearings, etc.
6. Uncertainty over what areas can be protected as wilderness or parks, marine life preserves, or archeological sites.
7. Socio-economic agreement/community development conditions — includes local purchasing, processing requirements, or supplying local infrastructure, such as schools and hospitals.
8. Trade barriers — tariff and non-tariff barriers to trade and restrictions on profit repatriation.
9. Labor regulations, employment agreements, and local hiring requirements.
10. Quality of infrastructure — includes access to roads, power availability, etc.
11. Quality of geological database — includes quality, detail, and ease of access to geological information.
12. Labor availability and skills — the supply and quality of labor, and the mobility that workers have to relocate.
13. Disputed land claims — the uncertainty of unresolved claims made by aboriginals, other groups, or individuals.
14. Political stability.
15. Security — the physical safety of personnel and assets.
16. Regulatory duplication and inconsistencies — includes federal/provincial, federal/state, inter-departmental overlap, etc.
17. Legal system — legal processes that are fair, transparent, non-corrupt, efficiently administered, etc.