The world’s top 5 most expensive oil, gas cities

18 October 2013 – As international oil and gas companies increasingly pursue hydrocarbons in frontier regions, the effect of investing billions of dollars into the developing countries where these energy resources are located has contributed to making places that were once regarded as backwaters, or even “Third World”, very expensive places to live. While natives to a particular country can rely on local knowledge to keep their own living costs down, expatriates – especially with a taste for comforts from back home – are finding that certain African cities are among the most expensive places in the world to rent accommodation or even to buy a pair of jeans. Here Rigzone looks at lists produced by consultancy firms ECA International and Mercer of the world’s most-expensive cities for expatriate workers to identify the most expensive oil and gas towns. Some of the results are quite a surprise:

Perth, AustraliaIn ECA’s list of the top 50 most-expensive cities in the world for expats, five are located in Australia.
Undoubtedly, the strong Australian dollar (which has improved by around six cents compared to the U.S. dollar during the past six months) has played its part in making Australia a more costly destination for expats. But a lot of this strength has been driven by interest in a wide range of commodities available in Australia, not least of which is oil and gas.
The Western Australian oil town Perth came behind Canberra and Sydney in ECA’s list as the 27th most-expensive city for expats in the world. But for the purpose of this list, focused on the most-expensive oil and gas towns, we are rating it at number five.
The boom in Western Australia’s energy sector has seen the state outstrip the rest of the country when it comes to job growth, as reflected by migration statistics that show Western Australia’s population growth increased by a whopping 3.4 percent in 2012 – compared to just 1.7 percent for Australia as a whole, according to the Australian Bureau of Statistics. Many of these migrants have flocked to Perth – the home of Australian oil and gas firm Woodside Petroleum Ltd., which owns extensive gas reserves in the Browse Basin offshore Western Australia.

Plenty of other firms have established bases in the city as they develop major gas projects, such as Chevron Corp.’s $45-billion Gorgon gas development or Royal Dutch Shell plc’s floating liquefied natural gas (FLNG) Prelude project.

Moscow, RussiaDuring Vladimir Putin’s tenure as President of Russia, then Prime Minister, and then President again, Russia has enjoyed significant investment in its oil and gas industry. Although Moscow is not close to Russia’s main hydrocarbon-producing areas there are plenty of oil executives based in the capital city since major international oil companies, such as BP plc, maintain large offices there, while Russia’s own major oil firms Gazprom OAO and Rosneft OAO have their headquarters located in the city.

Moscow has also become home to several billionaire oligarchs and a growing middle class, with both phenomena driven by the growth in Russia’s energy wealth.

This has served to make Russia’s capital one of the most expensive places to live in the world. ECA ranks Moscow as the world’s fifth most-expensive city for expats to live in, while Mercer ranks it at number two.

Mercer notes a luxury, two-bedroom unfurnished apartment costs an average of $4,600 per month in Moscow (or 14 times as much as a similar abode in Karachi, Pakistan), while a cup of coffee will set you back $8.29.
However, despite Russia turning its attention toward the Arctic region and the Russian Far East in order to further exploit the country’s hydrocarbon resources, a report in the New York Times in June of this year suggested that the country’s great gush of oil and gas wealth is “leveling off” and foreign investors are now “hanging back” amid concerns about an expanding government role in the economy.

Village in South SudanSouth Sudan is a new country that separated from Sudan and became an independent state in July 2011, taking with it much of its northern neighbor’s oil reserves.

Today, companies such as China National Petroleum Corporation, India’s ONGC Videsh and Malaysia’s Petronas are running the country’s oilfields – which were pumping some 300,000 barrels of oil per day until a shutdown in January 2012 due to a row with Sudan over oil fees (South Sudan relies on Sudan for oil exports). Production at various oilfields within the country is currently restarting.

South Sudan was also at war with its neighbor until a peace agreement was signed in 2005. So along with the arrival of oil men, the country has seen an influx of United Nations and NGO workers, which has also helped to drive up prices in its capital city, Juba, especially for the kind of accommodation sought by people from more developed countries.

This means that Juba is now rated as the fourth most-expensive city in the world for expats, according to ECA. ECA notes that the cost of exporting and transporting items commonly purchased by international assignees in locations like Juba is likely to be high, but a typical apartment in the city will cost an expat several thousand dollars per month.

Starvanger, NorwayScandinavia has long been regarded as very expensive, even by visitors from other parts of Europe, with a major tourist bugbear being the price of alcohol.
This view was confirmed in the summer by ECA International’s cost of living report, which showed that Tokyo had been knocked off its top spot for the first time in three years by Oslo – Norway’s capital.

The capital of Norway’s oil industry, however, is Stavanger. And Stavanger is currently rated by ECA as the third most-expensive location in the world for expats.

ECA notes that while prices have increased little since last year (when Stavanger was rated fifth in ECA’s list of the most expensive cities), the free-floating Norwegian krone has remained strong – reflecting Norway’s economic resilience.

A lot of this economic resilience is down to Norway’s oil and gas industry, where Statoil ASA is using its “fast track” methodology to bring oil and gas developments on the Norwegian Continental Shelf – such as the Svalin field in the North Sea – into production quickly and economically. The country is also opening up its Arctic region for development, with the country’s energy ministry recently inviting oil and gas companies to nominate further blocks for exploration in the Barents Sea.

Luanda, AngolaJust over a decade after a long-running civil war that claimed the lives of hundreds of thousands of people, the West African country of Angola is one of the world’s hottest locations for the oil and gas industry today.
Angola is the second-largest oil producer after Nigeria, according to Organization of the Petroleum Exporting Countries (OPEC), with developments like BP’s PVSM project – one of the largest subsea developments in the world – contributing to the country producing around 1.7 million barrels of oil per day. The country’s vice minister for petroleum recently stated that it has 13 billion barrels of proven oil reserves.

Meanwhile, the pre-salt layer off Angola’s coastline has also provoked interest among international companies hoping to find discoveries of a similar scale to those found in Brazil’s prolific Santos Basin.

All of this activity has led to Angola experiencing a significant influx of foreign oil workers in recent years, with capital city Luanda seeing a jump in prices for expats.

“Despite being one of Africa’s major oil producers, Angola is a relatively poor country yet expensive for expatriates since imported goods can be costly. In addition, finding secure living accommodations that meet the standards of expatriates can be challenging and quite costly,” Barb Marder, global mobility practice leader at consulting firm Mercer, stated in a press release in July.

According to both Mercer’s 2013 Cost of Living Survey and the latest cost of living report from ECA, Luanda ranks as the most expensive city in the world for expats.

For example, Mercer found that the typical cost to rent a luxury two-bedroom unfurnished apartment in Luanda is $6,500 per month (a similar apartment in Sydney, Australia would cost just $2,550 per month). Meanwhile, a fast-food hamburger meal costs just over $20 while a pair of blue jeans retails at $204.

ECA said that a commodity boom-driven currency appreciation in recent years has contributed to Luanda’s high living costs for expats.

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