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Fraser: Alaska’s reputation so-so The annual Global Petroleum Survey places Alaska in the middle of the pack among 157 jurisdictions; some question survey Eric Lidji For Petroleum News
Alaska continues to have a humdrum reputation worldwide and among the worst in North America, at least according to a recent survey of global petroleum industry executives.
The State of Alaska ranked 79th out of 157 jurisdictions while the federal Alaska Outer Continental Shelf ranked 75th, according to the 2013 Global Petroleum Survey by the Fraser Institute, a right-leaning Canadian think tank. In the 2012 survey, respondents ranked the State of Alaska 61st and the Alaska OCS 52nd among 147 jurisdictions.
The drop in the rankings is more the result of other jurisdictions doing better. Both the State of Alaska and the Alaska OCS received higher scores this year than last year.
The survey shows what decision-wielding executives think of Alaska, but the aggregated nature of the information makes it impossible to know whether those executives are interested in investing here, or have done any first-hand research on the state. For those reasons, some local policymakers have criticized previous Global Petroleum Surveys.
The survey shows North American and northern Europe having a near-lock on the top spots, but Qatar broke into the Top 20 this year, after ranking in the thirties for years.
The top five were: Oklahoma, Mississippi, Saskatchewan, Texas and Arkansas. The bottom five were: Venezuela, Ecuador, Iran, Bolivia and the Arctic Russian offshore.
Includes proved reserves As in previous years, the current survey occasionally gives high rankings to regions with minimal activities, such as Mississippi, which ranked second this year and last year, and first in 2011. Of the 157 jurisdictions in the current survey, 19 have no proved reserves.
To address that deficiency, the 2013 survey weighted the rankings by grouping jurisdictions according to their percentage of global proved reserves. Alaska fell into a second tier, defined as areas holding between 0.1 and 1 percent of total global reserves.
Of the 41 areas in the group, the State of Alaska ranked 21. The survey credited Alaska with 6.2 billion barrels of oil equivalent in proved reserves. Among other areas in the group with larger proved reserves, only Vietnam, Ukraine and Uzbekistan ranked lower.
The weighted ranking placed the Alaska Outer Continental Shelf into a third tier, defined as areas with less than 0.1 percent of global proved reserves. The Alaska OCS fell into the bottom category because much of its anticipated reserves remain unproven, according to the survey. Of the 70 areas in the group, the Alaska OCS ranked 41. The survey only credited the region with 23 million barrels of oil equivalent in proved reserves, which is certainly far less than what many experts and explorers believe the region will yield.
Shell’s experience As in previous years, the survey also included regulatory “horror” stories, which are anonymous anecdotes that aim to personalize the rankings. One story referenced the troubles Shell faced in the Chukchi Sea “whereby one government department leases the land and other departments prevent the lessee from exploring and developing it.”
The comment refers to Shell getting federal leases for Chukchi Sea drilling in 2008 and subsequently facing regulatory, permitting and legal delays, but the government can only be blamed for some of the misery Shell has suffered in Alaska in recent years. The company curtailed in 2012 program because of icy weather in the Arctic and postponed its 2013 program after its drillship ran aground. Shell now plans to drill next summer.
Reflecting the frustration many have (or perceive) with Alaska, the federal offshore ranked in the bottom quintile for “regulatory cost compliance,” which includes delays.
Challenging the methodology The Fraser Institute questionnaire asks respondents to score eligible jurisdictions on 16 factors ranging from fiscal terms, to regulations, to the skills of the local labor force, to safety. This year, the Fraser Institute got responses from 864 people at 762 companies.
A 2011 Legislative Research Services analysis challenged this aspect of the 2010 survey, which included fewer responses and jurisdictions than the 2013 survey but used similar methods. “It is important to note that while 645 individuals responded to the survey, none of those individuals has sufficient knowledge of every variable in each of the 133 jurisdictions to provide responses to questions in those areas,” the analysis determined.
An alternate ranking in the 2013 survey presents Alaska in a different light.
When the survey measured whether respondents indicated that a certain jurisdiction had the most or least favorable policies for exploration and development, the State of Alaska ranked 33rd (getting 16 “most” votes and four “least” votes) and the Alaska OCS ranked 92nd (getting seven “most” votes and six “least” votes) out of 157 eligible jurisdictions.
The 2013 survey also came at an odd time for Alaska.
The Fraser Institute collected responses from Feb. 20 to May 6 this year. Within those 14 weeks, lawmakers debated and approved changes to the state fiscal system, which Gov. Sean Parnell later signed the changes into law and opponents have since pushed to recall.
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