Political risk prospects improving in key emerging markets for global energy sector

Despite an unequalled period of geo-political turmoil, many economies are now presenting increased growth opportunities for global energy companies due to decreases in political risk and improvements in their legal and regulatory environment.

The 2012 Political Risk Map released on Tuesday by risk analysis and mapping company Maplecroft, in conjunction with Marsh’s Global Political Risk and Structured Credit Practice, shows growing economies with an improving climate for business investment in natural resources. These economies include Brazil, Bolivia, Chile, Colombia, India, Indonesia, Mexico, Peru, Russia, Thailand, Turkey and Uruguay. There are also less developed, more high risk countries like DR Congo, Mongolia and Myanmar that are showing evidence of improvements in the legal and regulatory business environment and may offer exciting investment opportunities for energy companies.

The map’s findings, designed to enable organisations to gain a greater understanding of how global risks may affect investment opportunities, were launched by Maplecroft CEO, Professor Alyson Warhurst at the recent Marsh 2012 National Oil Companies (NOC) conference in Dubai.

“The growth economies of Brazil, Russia, India, China, Mexico, Indonesia, South Korea and Turkey are increasingly attractive investment destinations due to the reduction in political risk. However, the country to watch over the coming year will be Myanmar,” said Professor Warhust. “Even though it is ranked 2nd most at risk on the 2012 map, recent political reforms and the prospect of sanctions being dropped, if Aung San Suu Kyi joins the cabinet, will place the country in the centre of 2012’s strategic landscape. Vast opportunities lie ahead for oil and gas companies looking to return to the country.”

“While fast growing economies present new and exciting investment opportunities for global oil and gas companies, other regions around the world remain geopolitical risk hotspots that need to be properly monitored and managed,” warned Jim Pierce, Chairman of Marsh’s Global Energy Practice.

The 2012 Political Risk Map, which forms part of Maplecroft’s Political Risk Atlas 2012, is also accompanied by a chart developed by Maplecroft to highlight hotspots of emerging instability on account of poor political freedoms combined with relative societal gains in health and education. According to the chart, countries exhibiting potential risk of regime change, if policy reform is not undertaken, include: Belarus, Cuba, Tajikistan, Uzbekistan, Venezuela and Vietnam. These economies are rich in natural resources, so any oil and gas investments require careful planning and monitoring on a regular basis.

Marsh’s annual NOC conference took place under the patronage of His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates and Ruler of Dubai.