NEWPORT BEACH, Calif.--(BUSINESS WIRE)--Indonesia’s climate for investments in the oil & gas sector weakened significantly due to restrictions on foreign direct investments, opportunities in Vietnam remain hampered by the South China Sea dispute, and investors in Egypt are at risk of confusing gradual political risk improvements for newfound, long-term stability according to a new ranking from the Emerging Markets Group of Alliant Insurance Services (www.alliant.com). Alliant’s Frontier Energy Risk Index provides oil & gas companies and investors with a yearly snapshot of changes in political risk levels in 14 emerging economies selected for their potential as “frontier oil & gas producing countries.”
Indonesia’s risk climate has weakened substantially over the past year, off 62 percent from its 2013 ranking. “The downgrade is largely due to the newly imposed restrictions on foreign investments, first in the mining sector, and now in the oil & gas sector,” said Dr. Michel Léonard, Chief Economist with Alliant’s Emerging Markets Group. “We expect this trend to continue regardless of the upcoming presidential elections.”
Indonesia was followed by Vietnam, which saw a 19 percent downgrade due to military tensions in the South China Sea. “Chinese authorities’ decision to move an oil rig into Vietnam’s exclusive economic zone is the most notable of many recent confrontations between China and other countries in the South China Sea,” said Dr. Léonard. “In the long term, we expect China’s actions to lead not to territorial expansion, but to China being granted rights to production in the waters it is claiming. Oil & gas companies should be aware of the changes this will bring to any current or future licensing agreements signed in the South China Sea, especially with Vietnam.”
Additional countries in negative territory were Thailand and Malaysia, with Yemen showing no change from 2013.
In Egypt, which received a five percent upgrade, Dr. Léonard warns investors to remain cautious of overestimating these improvements. “Egypt has emerged from a long run of political instability and a recent regime change to show some positive movement in our risk models. However, we remain guarded about its long-term prospects and warn investors not to confuse gradual improvements with medium or long-term structural stability,” he says.
Countries showing the greatest improvement included Ecuador (22 percent), Equatorial Guinea (17 percent), and Algeria (12 percent), while Libya, Republic of the Congo (RoC), Gabon, Angola, and Kazakhstan all posted modest gains.
The Frontier Energy Risk Index is based on macroeconomic and political risk loss data assembled through Alliant’s proprietary database and relationships with senior government sources. The rankings provide oil & gas companies and investors with a clear picture of the business risks associated with operations in these 14 countries. The full rankings can be found below:
| Country | Rating Change YoY | Ratings | Ratings | Key Change Driver | ||||||||||||
| 2014 | 2013 | |||||||||||||||
| Ecuador | 22% | 25.00 | 20.46 | Improving Macroeconomic Forecast | ||||||||||||
| Equatorial Guinea | 17% | 35.00 | 29.93 | Improving E&P Regulatory Framework | ||||||||||||
| Algeria | 12% | 15.00 | 13.40 | Marginal Reduction in War and Civil War Risk | ||||||||||||
| Libya | 10% | 14.57 | 9.55 | Marginal Improvement in War and Civil War Risk | ||||||||||||
| Congo (RoC) | 7% | 45.60 | 42.60 | Growing Regional Cooperation | ||||||||||||
| Gabon | 7% | 45.00 | 42.22 | Improving E&P Regulatory Framework | ||||||||||||
| Angola | 6% | 16.56 | 15.56 | Improving E&P Regulatory Framework | ||||||||||||
| Egypt | 5% | 33.00 | 31.31 | Marginal Reduction in War and Civil War Risk | ||||||||||||
| Kazakhstan | 1% | 25.00 | 24.71 | No Change | ||||||||||||
| Yemen | 0% | 5.00 | 5.00 | No Change | ||||||||||||
| Indonesia | -62% | 10.00 | 26.14 | E&P FDI Restrictions | ||||||||||||
| Vietnam | -19% | 25.92 | 31.92 | South China Sea Dispute | ||||||||||||
| Thailand | -5% | 35.13 | 37.13 | Political Risk | ||||||||||||
| Malaysia | -4% | 44.49 | 46.39 | Regime Transition | ||||||||||||
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About Alliant Emerging Markets
Alliant Emerging Markets (part of Alliant Insurance Services) offers credit and political risk analysis and mitigation solutions based on the latest available data. Consisting of brokers, risk analysts, lawyers, and former government officials that pioneered the use of systematic quantitative risk assessment to develop political and credit risk mitigation solutions, the group currently manages political and trade credit insurance programs covering more than $15 billion of assets in 70 countries.
About Alliant Insurance Services
Headquartered in Newport Beach, CA, Alliant Insurance Services, Inc. is one of the largest insurance brokerage firms in the United States and has a history dating back to 1925. Alliant provides property and casualty, workers’ compensation, employee benefits, surety, and financial products and services to more than 26,000 clients nationwide, including public entities, tribal nations, healthcare, energy, law firms, real estate, construction, and other industry groups. More information is available on the company’s web site at: www.alliant.com.
