Oil and gas the new frontier

Oil and Gas industry is one that undoubtedly stands apart. Evidently one of the world's biggest legit businesses, it has been termed the ‘billion dollar investment'. Oil and Gas Companies like Exxon and Chevron are ranked top in Fortunes 500. Every year, institutional and individual investors pump vast amounts of dollars in Oil and Gas exploration. Interestingly, many are asking why, especially with the high risks inherent in oil and gas investments and to discover the wide spectrum of investment opportunities readily available for them to choose from.

USA is the largest single consumer of Oil and Gas apart from having been the third largest producer of Oil in the world. Unfortunately, USA consumes more Oil than it produces and this is likely to continue in future with local production dwindling as demand increases. The raft of tax incentives introduced by the Congress to promote domestic production have made the industry the best tax advantaged sector on earth.

With the exception of the particular drilling equipment, intangible drilling costs are costs incurred in drilling. Some of those costs include labor, chemicals and grease. These costs often constitute 80% of the whole investment and therefore are 100% deductible in the year incurred regardless of whether or possibly not the well was completed that year. Conversely, tangible drilling costs are the entire costs of the device and will include Wellhead, Tanks, and Separators. Though 100% deductible, these costs that constitute 20-25% of the full investment must be depreciated during a 7 year period.

For small investors and producers, there is the ‘small producer tax exemptions' often known as the ‘depletion allowance'. This incentive excludes 15% of every an income from Oil and Gas wells from taxation. Additionally, working interest in an Oil and Gas well just isn't considered a passive activity. All net losses are therefore active income that can be offset against other designs of income like interests and capital gains.

Alternative Minimum Tax, Marginal Wells Incentive and Lease costs which are 100% deductible through the year incurred are the opposite tax related benefits. By continually re-investing their Oil and Gas income in new Oil and Gas projects, experienced investors can avoid income tax altogether.

Oil and Gas investments are defensive investments. Oil and Gas delivers steady streams of Cash flows regardless of the economic situation unlike Gold which is also an efficient hedge against inflation. Demand for Oil and Gas remain high while in a downturn making this investment a stable investment. Additionally, Oil and gas properties have witnessed widespread liquidity in the steady expansion of Oil and Gas property Auctions, that are markets for purchasing and selling. Credible Auction companies just like the Oil and Gas Asset Clearing House conduct auctions monthly numerous physical and online locations.

Oil and gas wells get depleted with time but gas and oil properties usually become more valuable with time even though a big proportion of the primary reserve has been explored. Emergence of new exploration techniques, production zones re-development and enhancing prices after a while just might be root of this.

Working interest, Partnerships and Money market funds are some of the ways by which investors can participate in the Oil and Gas industry. However, it is essential to choose your investment vehicle wisely because some of them are certainly risky while others don't confer the above tax benefits.

Accreditation requirements declare that investors have to meet certain income and net worth requirements. This clearly excludes some potential investors. However, those who qualify are sure to reap big. http://www.investmentoptions.net