This is a project which is very risky but with satisfactory returns, these two products are currently the most demanded commodity in the world. This is because of their industrial use. Prices of these products are too high creating a lot of interest to investors to undertake such ventures. Irrespective of it being a lucrative business, security regulators have warned potential investors of possible oil and gas investments dangers and scam that exist.
There are few methods of evaluating the period in which a project will take to give returns, one of them include payback period. Payback period takes into account initial cash outlay used by investor and the accruing cash inflow, it is the time taken for cash inflows to march the amount of money used. In this technique an investors chooses a project that a shortest time possible.
Such techniques include present value technique. This method discounts future cash flows to present value and equates them with the initial cash outlay. A decision criterion in this technique is an investor is expected to select a project that has a positive net present value.
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.
The other technique to evaluate project viability is by use of internal rate of return. This method is easier to use and calculate and is also accurate given accurate information. Before undertaking such big venture, an investor should first carry out a study on the market trend, determine whether buying shares in an oil and gas company is the most profitable decision or participating directly in the drilling and refining process.
Those who want to take up this venture should be in a position to evaluate risk involved properly and come up with mitigation measures to protect them from such risks. This business is not for those with faint heart or those investors who are risk averse, it is for risk takers. This is because the venture is extremely risky.
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.
These people should practice honesty, exercise integrity all the time and have experience in the sector. Experience is needed the most, have the people you are engaging worked on such or similar projects before, do they have enough exposure and are they licensed to carry out such projects, these are some of the things one should look at before working or engaging third parties
There are few methods of evaluating the period in which a project will take to give returns, one of them include payback period. Payback period takes into account initial cash outlay used by investor and the accruing cash inflow, it is the time taken for cash inflows to march the amount of money used. In this technique an investors chooses a project that a shortest time possible.
Such techniques include present value technique. This method discounts future cash flows to present value and equates them with the initial cash outlay. A decision criterion in this technique is an investor is expected to select a project that has a positive net present value.
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.
The other technique to evaluate project viability is by use of internal rate of return. This method is easier to use and calculate and is also accurate given accurate information. Before undertaking such big venture, an investor should first carry out a study on the market trend, determine whether buying shares in an oil and gas company is the most profitable decision or participating directly in the drilling and refining process.
Those who want to take up this venture should be in a position to evaluate risk involved properly and come up with mitigation measures to protect them from such risks. This business is not for those with faint heart or those investors who are risk averse, it is for risk takers. This is because the venture is extremely risky.
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.
These people should practice honesty, exercise integrity all the time and have experience in the sector. Experience is needed the most, have the people you are engaging worked on such or similar projects before, do they have enough exposure and are they licensed to carry out such projects, these are some of the things one should look at before working or engaging third parties
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