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The United States is the Most Attractive Destination for Upstream Oil and Gas Investment
The United States of America is the most attractive destination for new oil and gas investment. Overall, the country scored 8.4 out of 10 in the upstream attractiveness index. The country is ranked ahead of Canada, the Russian Federation and the United Kingdom. The country’s simple and balanced royalty/tax based fiscal system promotes the oil and gas industry in the country. The major advantages of the United States are the openness of the industry, availability of advanced infrastructure leading to low costs, and the availability of skilled labor and capital. The United States current position as the best investment destination is not sustainable for a longer period, as the country is already facing a lot of competition from the rest of the oil and gas-producing world. Most of the areas of the US are already highly explored for oil and gas.
Bangladesh has the Most Attractive Fiscal Terms Globally
Bangladesh has the most attractive fiscal system with the average government take lower than 40%. There is also no direct provision for royalty, which exists in most other fiscal systems. The average royalty rate is 12%, globally. There is also no direct state participation in oil and gas projects in Bangladesh. In addition to that, the country does not impose any tax on oil and gas companies. Almost all the terms in the fiscal system are either negotiable or lenient, thereby making the country’s upstream fiscal system the most attractive.
It is Cheapest to Develop an Offshore Field in Former Soviet Union and an Onshore Field in Latin America
In the Former Soviet Union, to develop a 100 million barrel field costs around $370 to 400 million, where as In Africa, it would cost double as much to develop the same sized field. In Latin America, to develop an onshore field of 100 million barrels size would cost $180 million, which is at least $100 million lesser than that of the most expensive regions (parts of the US and Asia) for oil and gas development.
Offshore Areas of the Emerging Economies will Continue to Attract Significant Investment due to the Presence of Large Untapped Reserves
The emerging economies of Latin America, Africa and Asia have received a substantial amount of investment in their oil and gas sector in last five years, despite harsh fiscal terms. The offshore areas of these countries have huge oil and gas resources that interest investors. In the recent bidding rounds across the world, Angola received the highest income as bonus. Brazil has also had two major discoveries in its offshore areas recently, which are the largest of their kind in the region.
The Oil and Gas Industry in Nigeria and Iraq Suffers Due to an Unstable Socio-Political Environment
Nigeria is the most attractive African country in terms of oil and gas resources. The country is the largest producer of oil in the region. However, in 2008, due to rebellion attacks on oil and gas assets, the production from the country’s oil and gas fields declined significantly and fell below the levels of Angolan production. Some companies like Shell have also shut their operations in the country.
The oil production in Iraq dropped significantly after the war with the US. The social unrest and political instability prevailing in the country has hindered the development of oil and gas projects despite the presence of significant proven oil and gas resources.
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