Global oil industry faces broad spectrum of political risk - S&P
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Escalating geopolitical tensions, hostile regimes and the threat of terrorist attacks in major oil-producing countries are among the top concerns of the global oil and gas industry, according to a report published by Standard & Poor's Ratings Services.
Political uncertainty and terrorist attacks on infrastructure in countries such as Iraq, Iran, Nigeria, and Venezuela have caused the oil industry considerable angst often followed by knee-jerk price spike fuelled by the potential threat to production.
The report says in such an environment, it is critical, when determining an energy producer's credit health, to assess the political threats to production and future investment in the largest oil producing countries.
"Within the broad spectrum of political risk, the most basic threat is forced renegotiation of the economic terms of production-sharing contracts and agreements, particularly when oil prices and profits are rising," said Standard & Poor's credit analyst John Thieroff.
According to the report, no fewer than six countries -- Venezuela, Algeria, Russia, Peru, Chad, and Argentina -- have increased taxes or royalties or instituted price ceilings on oil or natural gas production in the past few years, and the pace of these rent increases has accelerated in 2006.