Fraser Institute Global Petroleum Survey 2012

192 Pages·2012·7.78 MB·English

by  Gerry Angevine

Fraser Institute
Global
Petroleum
Survey
2012
Survey coordinators: Gerry Angevine, Miguel Cervantes, and Vanadis Oviedo
Ac knowl edge ments
First and fore most, we wish to thank the many man age rs and senior offi cers of petro leum explo ra tion
comp an ies and assoc ia ted firms who subm itt ed surv ey responses, thereby prov idi ng the data for the
anal y ses in this report. In addi tion, we are grate ful to var i ous indus try asso cia tions and non-profit
think tanks such as the Cent ral Asian Free Mark et Instit ute in Kyrgyzstan and the New Econ omic
School in the count ry of Georg ia for prov idi ng helpf ul cont act inform at ion.
Spec ial thanks are due to Fred McMahon, the Fras er Instit ute’s Vice Presi dent, Intern at ional Pol icy
Research, for his insight ful edit ing of this report; to Kristin McCahon for man agi ng its pub li cat ion;
and to Bill Ray for develo p ing the world and regional maps.
Any errors or omis sions are the sole respon si bili ty of the authors. As they worked inde pend ently,
opin ions expressed by the authors are their own and do not nec es sari ly reflect the opin ions of sup -
port ers, trust ees, or other staff of the Fra ser Instit ute.
Copy right
Copy right© 2012 by the Fra ser Instit ute. All rights reserved. No part of this pub lic a tion may be reprod uced in
any man ner what soe ver with out writ ten per mis sion except in the case of brief pass ages quoted in crit ic al
arti cles and reviews.
For more inform a tion on the Fra ser Insti tute and this publ ic a tion, please see the end of this doc um ent.
Date of is sue
June 2012
Ta ble of con tents
Sur vey in for ma tion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Ex ec u tive sum mary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Sur vey meth od ol ogy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Global re sults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 4
Re sults by con ti nen tal re gion . . . . . . . . . . . . . . . . . . . . . . . . . . 3 7
Op tional sur vey ques tions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2
Sin gle-fac tor re sults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 5
Tab u lar ma te rial: Sur vey data ap pen dix . . . . . . . . . . . . . . . . . . . . 1 07
Com pli ments re ceived . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184
Ref er ences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 85
About the au thors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 86
Pub lish ing in for ma tion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 87
Sup port ing the Fra ser In sti tute . . . . . . . . . . . . . . . . . . . . . . . . . 1 88
Pur pose, fund ing, and in de pend ence . . . . . . . . . . . . . . . . . . . . . 1 89
About the Fras er Ins ti tute . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 90
Ed i to rial Ad vi sory Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 91
Sur vey in for ma tion
The 2012 Fras er Instit ute Global Petrol eum Surv ey was dis tribu ted to man age rs and exec-
ut ives of petrol eum explor at ion and prod uct ion comp an ies around the world and to
firms that prov ide supp ort serv ices to such comp an ies.
The anal y ses cont ained in this report are based on inform a tion obtained from 623
respond ents repr es enti ng 529 comp an ies. The explor at ion and develo pm ent budg ets of
these par tic i pat ing comp a nies totaled about $ 265.6 bil lion in 2011. That rep res ents more
than 50 per cent of global upstream expen di tures last year, accord ing to infor ma tion
reported in the Inter na tional Energy Agency’s most recent World Energy Out look (Inter-
nat ional Energy Agency, 2011).
Ex ecu tive sum mary
This report prese nts the results of the Fras er Instit ute’s 6th annual surv ey of petro leum indust ry
execu t ives and mana ge rs regardi ng barr ie rs to investm ent in upstream oil and gas explor at ion and
prod uct ion in vari o us jurisd ict ions around the globe. The surv ey responses have been tall ied to
rank prov inces, states, and coun tries accord ing to the extent of the invest ment bar ri ers. Those bar -
ri ers, as iden ti fied by the sur vey respon dents, include high tax rates, costly regu la tory schemes,
uncer tainty over envi ron men tal reg u la tions and the inter pre ta tion and admin is tra tion of reg u la-
tions gov erni ng the petro leum indus try, and secur ity threats.
A total of 623 respond ents part ici p ated in the surv ey this year, prov idi ng suff ic ient data to evalu -
ate 147 jurisdictions. By way of comp ari son 135 jurisd ict ions were evalu a ted in the 2011 sur vey,
133 in 2010, and 143 in 2009.
The jurisd ict ions were assigned scores for each of 18 fact ors that affect invest ment decis ions. The
scores are based on the prop ort ion of nega t ive responses a jurisd ict ion received. The greater the
prop ort ion of nega t ive responses for a jurisd ict ion, the greater were its perc eived investm ent barr i-
ers and, there fore, the lower its rank ing.
An All-Inclus ive Comp osi te Index derived from the scores of the 18 fact ors prov ides a comp reh en-
sive assess ment of each juris dic tion. On this index, the 10 least attract ive juris dic tions for invest -
ment (start ing with the worst) were Bolivia, Ven e zuela, Iran, Russ ia—East ern Siber ia, Libya,
Ecuad or, Uzbekistan, Argen tina—Santa Cruz, Iraq and Rus sia—other (i.e., all of Rus sia except for
Offs hore Arct ic, Offs hore Sakhalin and Easte rn Siber ia). Each of the jurisd ict ions in this group
except Argent ina—Santa Cruz were also among the 10 least desira ble jurisd ict ions for invest ment
in oil and gas explo rat ion and devel op ment reported in the 2011 sur vey. (Rus sia, which was not
brok en down into sub-regions in the 2011 sur vey, was among its 10 worst jurisd ic tions.)
Barr ie rs to invest ment have increased in a num ber of juris dic tions over the past year. In par tic u lar,
less attract ive All Inclus ive Index valu es by as much as 15 points or more comp ared with the corr e-
spond ing 2011 valu es are indi cated in the case of the Timor Gap Joint Petro leum Develo p ment
Area (JPDA), Chile, Bah rain, Urug uay, Alban ia, New Brunsw ick, Côte d’Ivoire, Papua New
Guinea and Argen tina’s Mendoza, Salta, and Santa Cruz prov inces. The dete ri o ra tion was great est
in the case of Chile, Argent ina – Santa Cruz, New Brunsw ick, Argent ina – Salta, Bah rain, Urug uay
and Côte d’Ivoire. New Brunsw ick’s poor perf orm ance is due to explore rs’ conc ern with the man-
ner in which petrol eum indust ry regu lat ions are being admini s tered, uncert ainty over the nature
of the envir onm ent al regu l at ions that will apply, and threats by anti-develo p ment activi sts.
The juris dic tions with All Inclu sive Index val ues in the first quintile (i.e., less than 20), sugg esti ng
that obsta cles to invest ment are lower than in other jurisd ict ions, are all located in Can ada, the
United States, and Europe. Accord ing to this year’s sur vey, the 10 most attrac tive juris dic tions for
investm ent worldw ide are Oklahoma, Miss iss ippi, Texas, North Dakota, Mani t oba, Nethe rl ands,
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New Mex ico, Kan sas, Denm ark and West Virg inia. Four new com ers to this pres ti gious
group—Mani toba, Nethe rl ands, New Mexi co, and Denmark—displaced Ohio, Nethe r-
lands—North Sea, Hung ary, and Alab ama (which was not ranked this year).
This year, thirt een jurisd ict ions improved their rela tive attract ive ness for investm ent by at least 10
points on the All Inclus ive Index meas ure. Of those, the North west Terr it o ries, Uganda, Guya na,
Cali forn ia, Turkmenistan, and Azerbaijan improved by at least 20 points on the All Inclus ive Index
mea sure and each achieved sig nif i cant gains in the global and regional rank ings. Other juris dic -
tions that improved sign if i cantly on that index this year are New Mexi co, Col o rado, Penn sylv a nia,
Briti sh Colum bia, US Offs hore—Gulf of Mexi co, Maur it a nia, and Alberta.
Alberta’s global rati ng has improved steadily foll owi ng a drop to 92nd place (of 143) in 2009 when
the so-called New Roy alty Framew ork came into effect. In 2010, the gove rnm ent announced that
by 2011 the roy alty struct ure would be adjusted to restore com pe ti tion with other jurisd ict ions.
While Alberta’s rank improved to 51 (of 135) in 2011, the results indi cated that inves tors were con-
cerned with aspects of the reg ul at ory syst em related to oil and gas explor at ion and devel op ment,
espec ially the extent of unnece ss ary duplic at ion and the time it took to have proj ect applic at ions
approved. This year, Alberta ranks 21st of 147 juris dict ions globa lly. The May 2011 gove rnm ent
announcem ent that it plans to stream line energy regu lat ory pro cesses and proc ed ures under a sin -
gle reg u lat or may have reduced some of the indus try’s conc ern over reg u lat ion.
A rela tively large perc enta ge (25 perc ent or more) of respon dents who answered ques tions about
South Sudan, Dem o cratic Republ ic of the Congo (Kinshasa), Bolivia, Soma li land, Urug uay, Iran,
Cyprus, Queb ec, Libya, Brazil—Pre-salt Offs hore, Niger ia, and New Brunsw ick believe that explo -
rat ion and develo p ment activi ty in those jurisd ict ions would likely increase by more than 100 per-
cent if gov ernm ents adopted “best pract ices.” The surv ey respond ents sugg est that activ ity could,
potent ially, be boosted the most (by the greate st perc enta ge) in Kazakhstan, Camb od ia, India,
Russ ia—other, Tur key, Iran, Alban ia, Bolivia, Papua New Guinea, Vene z uela, Ukraine, Vietn am,
Niger ia, Indon es ia, Myanmar, Russ ian—Easte rn Siber ia, Mozamb ique, and Guat em ala. The
results sugg est that many other coun tries, states, and prov inces could also enjoy con sid era ble ben-
ef its by adopti ng best pract ices.
The politi c al upheaval that occurred in vari o us Midd le East and North Afric an Arab states duri ng
2011, and which con tin ues in some juris dict ions (such as Syria), appears to have had some effect
on sur vey respon dents’ per spec tives regard ing those coun tries’ rel a tive attrac tive ness for invest-
ment. Of all the Arab states that were ranked in 2011 except Qatar, Bahr ain had the low est and
theref ore more attract ive All Inclus ive Index value. Now it is seen as posi ng greater barr ie rs to
invest ment than Oman, Tuni sia, Morocco, Kuwait, and Leb a non. The change in Bah rain’s rel a tive
attrac tiven ess, and that of some other Arab states that have been subj ect to unrest, is mainly due to
the impact that the upheaval has had on the surv ey part ici p ants’ pers pect ives regardi ng politi c al
sta bil ity and secu rity.
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Respon dents’ com ments high light rea sons for the invest ment attract ive ness (or not) of some
juris dic tions. Among other fac tors, inves tors indi cate that they con tinue to turn away from juris -
dic tions with oner ous fis cal regimes, polit i cal insta bil ity, land claim dis putes, and cor rup tion.
Sim i larly, inves tors pre fer to avoid juris dic tions with costly, time-con sum ing uncer tain reg u la-
tions. Other fact ors being equal, comp et i tive tax and reg u lat ory regimes can attract invest ment
and thus generate substantial economic benefits.
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Surv ey methodology
Sam ple design
This surv ey is designed to ident ify the provi nces, states, and coun tries with the greate st barr ie rs to
investm ent in oil and gas explor at ion and prod uct ion. Jurisd ict ions assessed by invest ors as
relatively unat tract ive may there fore be prompted to cons ider reforms that would improve their rank-
ing. Pres uma bly, petrol eum comp a nies use the inform at ion that is pro vided to cor robo rate their own
assess ments and to iden tify juris dic tions where the busi ness con di tions and reg u la tory envi ron ment
are most attract ive for invest ment. The surv ey results are also a usef ul source of inform a tion for the
media, pro vid ing inde pend ent infor ma tion as to how par tic u lar juris dic tions com pare.
The surv ey was dist ribu ted to man age rs and execu tives in the “upstream” petro leum indust ry.
This includes explo rat ion for oil and gas reserves, and the pro duc tion of crude oil, bitu men, and
both conv ent ional and non-conv ent ional forms of natu r al gas. It does not include the refini ng and
proc essi ng of crude oil and raw natu r al gas, or the transp ort at ion and mark eti ng of petrol eum
produ cts.
The names of poten tial respon dents were taken from pub licly availa ble memb ers hip lists of trade
asso cia tions and other sources. In addi tion, some indus try asso cia tions and non-profit think tanks
(e.g., the Cent ral Asian Free Mark et Instit ute in Kyrgyzstan and the New Econ omic School in the
coun try of Geor gia) pro vided con tact infor ma tion.
The surv ey was cond ucted from Febr ua ry 8, 2012, until May 2, 2012. A total of 623 responses were
received from indi vid u als work ing with 529 comp a nies. As figu re 1 illust rates, about half of the respon-
dents iden ti fied them selves as either a mana ger or holdi ng a higher-level posit ion. The com pa nies that
Fig ure 1: The position survey respondents hold in their company, 2012
Company Specialist/Advisor Professional Consultant,
(e.g., Landman, Geologist, Advisor, or Negotiator
Economist, Planner, or Lawyer) providing services to
21% companies in the
petroleum industry
20%
Company Group,
Division or Unit Manager
18%
Other: 10%
Company Vice President
9%
Company Chairman, CEO,
President, or Director: 22%
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part ici pated in the sur vey account for more than 50% of the annual spendi ng on petrol eum explor a-
tion and pro duct ion by the intern at ional oil comp a nies (Intern at ional Energy Agency, 2011).
Figu re 2 shows the prin cip al focus of the petro leum explo rat ion and devel op ment activ i ties of
com pa nies whose man ag ers or other rep re sen ta tives par tic i pated in the sur vey. The focus of most
of these com pan ies (80 per cent) is on findi ng and develo p ing conv ent ional oil and gas reserves.
Uncon ven tional nat u ral gas explo ra tion and devel op ment rep re sented 11 per cent of the focus.
Nine perc ent of the upstream activi ty that part ici p ants employed by petrol eum firms reported
involves unconv ent ional oil resources. This focus is assumed to be largely related to Alberta’s oil
sands and to the tar sands in Ven e zuela’s Orinoco Belt, since pro duc tion of oil from kerogen found
in shale rock is not yet comm erc ially viab le. Part of the focus on “unconv ent ional” oil sources may
reflect growi ng intere st in the applic at ion of hydraul ic fracking techn iques to release and prod uce
oil found in shale form at ions. Howe ver, the quest ionn aire did not ident ify that activi ty as
uncon ven tional.
Figu re 2: Company focus in the petroleum exploration and
development business, as indicated by respondents
Natural gas from non-conventional
sources such as coal bed methane
and shale gas: 11%
Crude oil from conventional
sources: 50%
Natural gas from conventional
sources: 30%
Crude oil from non-conventional
sources such as bitumen (oil sands)
and oil shale: 9%
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Sur vey ques tion naire
The surv ey was designed to cap ture the opin ions of man age rs and execu tives regardi ng the level of
invest ment bar ri ers in juris dic tions with which their comp a nies were famil iar. Respon dents were
asked to indic ate how each of the 18 fact ors listed below influe nce comp any decis ions to invest in
var i ous jurisdictions.
1. Fis cal terms—gov ern ment require ments per tain ing to roy alty pay ments, pro duc tion shares,
and licens ing fees.
2. Tax a tion regime—the tax bur den (other than for oil prod uct ion), includ ing pers onal, cor-
po rate, pay roll, and capi tal taxes, and com plexi ty of tax com pli ance.
3. Uncert ainty con cerni ng the basis for and/or antic i pated changes to envi ron men tal regu la tions.
4. Uncert ainty regard ing the admin is tra tion, inter pre ta tion, and enforce ment of exist ing regu -
lat ions and con cern with the frequency of changes to regu l at ions.
5. Cost of reg u la tory com pli ance—re: fil ing per mit appli ca tions, par tic i pat ing in hear ings,
etc.
6. Uncert ainty over what areas can be prot ected as wild ern ess or parks, marine life pres erves,
or arche o log i cal sites.
7. Socio-eco nomic agree ment/com mu nity devel op ment con di tions—includes local pur chas ing,
pro cessi ng require ments, or sup ply ing local infras truct ure such as schools and hos pi tals.
8. Trade barr ie rs—tari ff and non-tar iff barr ie rs to trade and restric tions on profit
repa tri a tion.
9. Labor regu l at ions, employ ments agreem ents, labor mili tancy/work disr upt ions, and local
hir ing require ments.
10. Quali ty of infra struct ure—includes access to roads, power availa bili ty, etc.
11. Quali ty of geo logi cal data base—includes quali ty, detail, and ease of access to geo logi cal
inform at ion.
12. Labor availa bili ty and skills—the sup ply and qual ity of labor, and the mobil ity that work ers
have to reloc ate.
13. Disp uted land claims—the uncert ainty of unre solved claims made by aboriginals, other
groups, or indiv idu a ls.
14. Polit i cal sta bil ity.
15. Secur ity—the phys i cal safety of pers onn el and assets.
16. Reg u la tory dupli ca tion and incon sis ten cies (includes fed eral/pro vin cial, fed eral/state,
inter-depart men tal over lap, etc.)
17. Legal syst em—legal pro cesses that are fair, trans par ent, non-cor rupt, effi ciently adminis-
tered, etc.
18. Cor rupt ion of gov ernm ent offi cials—bribe ry, extort ion, etc. increasi ng the cost and reduc-
ing the likel ih ood of obtaini ng licenses and approvals.
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