Dissecting the Frasier Institute Report

Fast Facts Intro:

• Report ranks 97 international jurisdictions that collectively represent 52 percent of proved oil and gas reserves worldwide and 66 percent of global oil and gas production. The rankings do not take into account the amount of proved reserves in a jurisdiction.
• Completing this report were 333 oil and gas executives and managers responded to this year’s survey, which evaluates jurisdictions based on investment factors
• The investment factors are highly influenced by Policy Perception Indexes (PPL) which include but not limited to fiscal terms, taxation, environmental regulations, regulatory costs, consistency and enforcement, political stability, quality of infrastructure and geology, and availability of a skilled workforce
• Among the 15 jurisdictions with the largest petroleum reserves worldwide, Texas is number one, followed by United Arab Emirates, Alberta(Canada), Kuwait and Egypt.
• Among regions, Venezuela is number one, Europe finished second to the United States, followed by Canada and Australia. Globally, every region except Africa, Canada, Latin America and the Caribbean experienced declines in investment attractiveness, according to the survey.
• This year, U.S. states comprise six of the top 10 jurisdictions around the world:Texas (1^st), Oklahoma  (2^nd  ), North Dakota (3^rd), West Virginia (5^th), Kansas(6 th) and  Wyoming (9^th).
• California and nine foreign jurisdictions are the least attractive (investment) jurisdictions for oil and gas investments and their PPI rankings reflect it.

“With oil and gas investors losing confidence around the world, it’s crucial for policymakers to pursue sound regulatory and tax regimes—and perhaps most importantly stable environmental protections —that attract, not deter, petroleum investments,” Green said.  He further explains, “This year the United States experienced a two-point decline in its weighted score. Despite this, the United States remains the region with the most attractive policy environment for investment in upstream oil and gas.” (emphasis added) Kenneth Green, the Fraser Institute’s senior director of natural resource studies and co-author of the 2017 Global Petroleum Survey, said, “Texas and Oklahoma have, for years, been seen as the most attractive jurisdictions in the world for oil and gas investors — proof that sound regulatory policies and stable environmental protections help attract scarce investment dollars even when commodity prices are down.” Texas, Oklahoma and North Dakota, as well as Saskatchewan in Canada, are the only four jurisdictions in the world to consistently rank in the top 10 for six straight years.  These jurisdictions dominated the lists with “Policy Perception Indexes” (PPI) of 100 percent, 94.14 percent and 91.54 percent, respectively – it is West Virginia that had one of the most notable improvements in the rankings with a PPI of 90.81. According to the survey, “West Virginia jumped 17 spots this year into 5th (of 97), after placing 22nd (of 96) in 2016. This marks the first time West Virginia has been in the global top 10 in the last five years.” All told, the United States ranks high overall with 16 of the 21 U.S. jurisdictions included in the survey ranking in the top 50 percent globally. And all but three jurisdictions fell into the top two investment quintiles with PPI scores of 60 or better, as the following graphs show. So what happened to PA and OH???   It was about seven years ago at Canton Chamber of Commerce’s inaugural Utica Summit, J.P.Morgan - an international investment representative was keynote speaker.   I remember it like it was yesterday.   The essence of his presentation was – ‘there is enough natural gas in the Appalachian Region to fuel the entire east coast for 50+ years’.    In fact, he coined Marcellus as the “Marcellus Monster” with high expectations of investments globally in the Marcellus and Utica.   On the graph PA and OH have not fared well over the 2-3 years when compared to WV who jumped 17 stops – in one (1) year!   Shortly after PA’s Governor Wolfe came into office the governors of PA, OH and WV met to discuss the future of natural gas production in the Appalachian Region knowing that due to the ‘investment’ needed by the oil & gas industry the region (and their constituents ) could reach its potential only if all three states worked together.  Surprisingly – at least to me- all three governors boasted how they work with the oil & gas industry while maintaining prudent environmental stewardship.   Not sure about OH, but PA seems to have dropped the ball starting with the process of issuing permits.   And now, at the start of campaign season, Governor Wolfe is back to additional fees and a severance tax on oil and gas.   It’s been his campaign promise on his first run, not sure how much mileage he’ll get on the second run.   Already competition is gearing up to defeat Wolfe.   However, in spite of these challenges the rig count is up in PA and OH with more rigs moving in early 2018.  Pipelines in PA have been stymied with environmental activists who are believed to be funded by large foundations in PA.   Like the chicken and the egg, which came first; PA and OH may need to wait for new governors or changes to the regulation for the Appalachian Region to reach its real investment potential. Joseph Barone President Shale Directories, LLC www.shaledirectories.com jbarone@shaledirectories.com

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