OIL AND GAS EXPLORATION COMPANIES

The exploration of oil and gas has been undertaken by various companies in different parts of the world. Such an investment is of crucial purpose owing to the energy demand present in the world today.

Amidst these companies, there are those that are state corporations. The probable sense for this is accorded to the high capital involved when developing such companies, the need to maintain control of such reserves by the government. Examples of the companies involved in the exploration of gas and oil include:

Risks Faced by the Exploring Companies

During the exploration of oil and natural gas, several risks such as high levels of capital expenditure and natural hazards are inevitable. It is therefore of utmost importance for potential investors to go through these issues that heavily burden oil and natural gas exploring companies.

Political Risk

The major way politics affect the companies is through the regulations. In as much as these regulations are likely to vary from state to state and increase when the companies are working on deposits abroad, they all limit and lay a check on where, when and how the extraction is done.

Some political risks are obvious e.g. operating in a country which has an unstable dictatorial system of governance and or a sudden history of nationalization. There are companies that will not mind such risks as long as the oil and gas deposits are present.

Price Risk

Price plays a central role in determining whether working on a reserve is feasible or not. It goes without saying that the higher geological barriers to easy extraction a reserve has, the more price risk is faced.

Forecasts by the O&G Companies come in to predict the likely prices over the term of the project so as to decide whether to begin exploration or not.

Geological Risk

This kind of risk considers the possibility of a reserve being difficult to explore or being smaller than estimated.

Much of the easy-to-get oil and gas has been tapped out leaving those reserves found in less friendly locations.

Cost Risk

Operation costs and all the uncertainties involved in the industry makes the oil and natural gas companies very capital-intensive.

Supply and Demand Risk

Financial crises and macroeconomic factors can dry up capital or even affect the industry independently of the usual price risks.

Despite all the risks involved however, there is an existing demand for energy and oil and natural gas fill this need. Investors can still find rewards in the exploration of gas and oil.