These are ventures undertaken by investors who are risk takers. The investors undertake the projects with an aim of getting future returns either in short run or long run. Short term projects does not involve heavy capital, the risk are minimal and returns start flowing within a short period of time that is a period less than five years. Long term venture take more than five years, require heavy capital and are faced with a lot of risks. So oil and gas investments can fall into these two categories depending on the type of venture undertaken by investor.
Business who wish to grow and expand with go for long term projects while those business who want to make quick return on their capital invested they will go for the short term investments. There are several techniques that can be used to evaluate the viability of a project even before undertaking it.
The other technique is internal rate of return, it evaluates how much return an investor will get from a certain project, and the choosing criteria is an investor chooses a project with high internal rate of return. If someone wants to take up the gas and oil venture they should first study the market wisely and identify markets trends so that they can make wise decisions on when to invest.
Some of risk facing this industry are reserve risk, this risk involve not striking a big enough reservoir to meet your demands. Before starting drilling process first carry out a series of tests on the soil to determine or predict with reasonable accuracy the size of reservoir to expect. Another challenge is price risk, the prices of gas and oil are state controlled or sometimes left to market demand and supply forces to set prices.
Entrepreneurs in these sectors should first answer this primary question, why did such deal or project come their way. This is critical as it concerns capital intensive venture, it matches capital with project on hand. Appropriate capital will be generated by educated investors who know one or two things on such projects, they understand the technical issue and legal issues involved.
Direct participation may be lucrative due to heavy capital required. They should take caution not to drill in areas not tested and approved to have oil reserves else they risk undertaking a venture which will result to huge losses. There are risks involved in this venture, and one of them includes mechanical risk. The risks here range from human injuries as the drilling process involves a lot of mechanization to delays due to mechanical failures.
Drilling thousands feet deep in the ground, perforating it accurately, steel or cement casing the hole, and outfitting so that oil can be brought to earth surface is a process which is very sensitive and dangerous. It can lead to loss of lives or environment pollution. The process is associated with very expensive hiccups but irrespective of this hiccups it is a good venture with good returns.
If cementing is not done properly is can leak gas or oil behind casing instead of it flowing smoothly inside the casing. Reservoirs sometimes will call for sand screening and use of specialized chemicals which can corrode pipes used especially if temperatures are too high. Another risk is reserve risk, the size of reservoir will ultimately determine the economic sense of such projects.
Business who wish to grow and expand with go for long term projects while those business who want to make quick return on their capital invested they will go for the short term investments. There are several techniques that can be used to evaluate the viability of a project even before undertaking it.
The other technique is internal rate of return, it evaluates how much return an investor will get from a certain project, and the choosing criteria is an investor chooses a project with high internal rate of return. If someone wants to take up the gas and oil venture they should first study the market wisely and identify markets trends so that they can make wise decisions on when to invest.
Some of risk facing this industry are reserve risk, this risk involve not striking a big enough reservoir to meet your demands. Before starting drilling process first carry out a series of tests on the soil to determine or predict with reasonable accuracy the size of reservoir to expect. Another challenge is price risk, the prices of gas and oil are state controlled or sometimes left to market demand and supply forces to set prices.
Entrepreneurs in these sectors should first answer this primary question, why did such deal or project come their way. This is critical as it concerns capital intensive venture, it matches capital with project on hand. Appropriate capital will be generated by educated investors who know one or two things on such projects, they understand the technical issue and legal issues involved.
Direct participation may be lucrative due to heavy capital required. They should take caution not to drill in areas not tested and approved to have oil reserves else they risk undertaking a venture which will result to huge losses. There are risks involved in this venture, and one of them includes mechanical risk. The risks here range from human injuries as the drilling process involves a lot of mechanization to delays due to mechanical failures.
Drilling thousands feet deep in the ground, perforating it accurately, steel or cement casing the hole, and outfitting so that oil can be brought to earth surface is a process which is very sensitive and dangerous. It can lead to loss of lives or environment pollution. The process is associated with very expensive hiccups but irrespective of this hiccups it is a good venture with good returns.
If cementing is not done properly is can leak gas or oil behind casing instead of it flowing smoothly inside the casing. Reservoirs sometimes will call for sand screening and use of specialized chemicals which can corrode pipes used especially if temperatures are too high. Another risk is reserve risk, the size of reservoir will ultimately determine the economic sense of such projects.
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