Petroleum experts rate Bolivia, Venezuela, Ecuador, Russia and Iran as having the greatest barriers to investment, with many respondents emphatically stating that the risk and uncertainty brought on by government policies in these countries convinced them to stay away.
"It's no surprise that the jurisdictions that top the survey as the most attractive for investment are those that not only offer the right geology, but offer stability and regulatory policies that are clear, certain, and not subject to change by political whim," said Gerry Angevine, senior economist with The Fraser Institute's Centre for Energy Policy Studies and lead author of the survey.
"At the other end, jurisdictions with the worst scores are those with a political climate of uncertainty. People won't invest in an area if they feel the government could change the rules or expropriate their property at any moment."
Aside from Colorado, which topped the survey, other U.S. states perceived to have low barriers to investment are Wyoming, Alaska, and Texas. Among Canadian provinces, Saskatchewan and Alberta are rated as the two with policies most encouraging for investment.
"Colorado is a bit surprising to see at the top of the survey, but it's an indication of the stable regulatory environment in that state combined with a favourable tax regime and other positive factors," Angevine said.
Modeled after the popular Fraser Institute Survey of Mining Companies, the Global Petroleum Survey 2007 is designed to help measure and rank the investment climate of various oil and gas producing regions.
The survey results are used to rank jurisdictions according to the barriers to investment posed by existing policies and institutional arrangements. This is done through the use of a number of composite indexes which measure responses to survey questions pertaining to the impact on investment of fiscal terms (royalties and licensing agreements), taxation, the local price of natural gas, the cost of regulatory compliance, regulatory uncertainty, environmental regulations, local processing requirements, trade and labour regulations, local public infrastructure, business infrastructure, quality of the geological database, labour availability, native land claims, political stability, and security concerns.
All-inclusive Composite index
According to the All-Inclusive Composite Index results, Colorado, Thailand, Qatar, Romania, and the United Kingdom are rated as the most attractive investment locations.
The five jurisdictions with the greatest barriers to investment are: Bolivia, Venezuela, Ecuador, Russia and Iran. They are followed by Argentina, Cuba, Angola, Nigeria, and Newfoundland and Labrador, in that order.
Commercial Environmental Index
The Commercial Environment Index looks at the commercial barriers to investment such as fiscal terms, taxation, business infrastructure, and labour availability. Thailand, Trinidad & Tobago, Peru, Wyoming, and Colorado ranked the highest since the barriers posed by these factors are seen to be lower than other jurisdictions. Saskatchewan was the highest ranked Canadian province.
Bolivia, Venezuela, Ecuador, Newfoundland and Labrador, and Russia received the lowest rankings.
Regulatory Climate Index
The Regulatory Climate Index measures the cost of regulatory compliance, regulatory uncertainty, and environmental regulations. The Northwest Territories shared top spot in this ranking with Colorado, Peru, Qatar, Romania, and Thailand.
Regulatory barriers to investment were seen to be the greatest in Venezuela, Bolivia, Ecuador, Russia and Iran. Venezuela and Bolivia, in particular, had a high percentage of survey participants who indicated that they would not invest in those countries. Newfoundland & Labrador was the lowest ranked Canadian province.
Business Environment Index
The Business Environment Index combines information pertaining to commercial conditions and the regulatory environment which underlie both the Commercial Environment Index and the Regulatory Climate Index. Malaysia, Qatar, Romania, Thailand and Peru had the highest rankings. Venezuela, Bolivia, Ecuador, Russia, and Argentina were seen to have the greatest barriers to investment stemming from commercial and regulatory factors.
Geopolitical Risk Index
The Geopolitical Risk Index measures views on political stability and security. Venezuela, Bolivia, Nigeria, Iran and Ecuador were ranked the lowest in this index. Survey respondents singled out Venezuela and Bolivia as having the highest risk for security and stability.
