jeudi 1 janvier 2015

Oil And Gas Investment Opportunities Brief Introduction

By Stacey Burt


As oil and gas became the main source of energy, especially during the mid-2000's, oil and gas prices increased proportionately. Oil and gas investment became the most lucrative investment opportunities due to energy demands estimated to be 86-87 million barrels a day according to the Organization of Petroleum Exporting Countries' 2008 figures.

Tax exempt investment in an oil or gas trust should be considered by the investor seeking direct sector exposure. The process involves investing in the production stage, or during the purchase of exploratory drilling machinery. The process provides a pass through treatment from investments and incomes in this energy sector, with mutual funds and future contracts in the oil sectors being the most common investment undertaken.

Several options exist for investors eyeing this promising industry and one of the simplest opportunities is investing in the stock of oil and drilling companies. The energy sector is said to have something for every individual as big investors can invest in exchange-traded fund commonly referred to as the ETF's and by this investors make direct investments on oil futures contracts. Just like any other investments, oil investors are advised to conduct an in-depth research or seek the services of energy investments professional before embarking in this kind of venture.

What drives the world economy is basically oil and gas. There are many ways by which the products from gas and oil can be used, therefore, anything that happens within this sector has the power to change the direction of a country's economy.

During the exploration process, companies are at high risk when buying tracks of land with making profits focused on once drilling begins. Since there is always a probability of striking or finding oil in production quantity in a certain area, the companies aim to acquire land on these places. Other opportunities such as provision of oil mining infrastructure, transport and communication, marketing, shipping and legal compliance procedures are also available to the investor.

Previous trends have shown that when oil and gas prices rise the economy will slow down or become stagnant. Although investors are warned of this, they are also advised that large profits up to ten times the original investment amount are also quite possible. The oil and gas sector also has many tax advantages as most tax remains invisible to those purchasing shares from public traded stock.

However, when the risks anticipated occur, such as when there is no oil found at a given site, the investors are set to lose. The investors, therefore, may seek to redeem their interests from various options available through brokers. Brokers can be costly with some charging more than a quarter of the funds received.

Another risk factor includes human involvement. Several factors in the professional ability of the operator must be questioned prior to drilling. Mechanical risks are paramount in the search for oil and gas and play a major role in profit realization. A reserve risk is needed to counteract the well control and the seismic evaluation. Lastly, the commodity price risk must be considered and planned for.




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