US seen ranking low as an investment base

By OGJ editors
HOUSTON, Sept. 14
-- The US “ranks near the bottom as a home base for overseas upstream oil and gas investment,” concludes IHS CERA in a new study.

The study creates a benchmark for assessing competitive positions from two directions.

“To understand the fiscal competitiveness of companies, you have to consider not only the fiscal terms in the country where oil and gas are being developed but also the fiscal terms of the home country of the company,” explained David Hobbs, IHS CERA chief energy strategist, at the World Economic Forum in Tianjin, China.

“The costs of repatriating income from international operations back to the United States are higher for US companies than what many of their chief competitors face when repatriating income back to their respective countries,” he said. The imbalance helps explain why the share of total investment by US companies is declining.

Companies from countries such as the UK, the Netherlands, Russia, Canada, Norway, Italy, and China pay less in additional taxes on repatriated income and thus have a competitive advantage over US companies, IHS CERA said.

In some cases, the advantage enables companies to bid twice as much as US companies can for oil and gas concessions.

“The combined costs of the fiscal systems of host countries and of home countries create differences in the valuation of assets,” Hobbs said. “This difference is reflected in the amounts that companies can afford to bid for oil and gas rights.”

The consultancy worked with Deloitte on the study.

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