Whether you are a new or avid investor, it is important to be familiar with a few common terms used in the oil and gas industry when it comes to energy investing in the United States. Having the basic knowledge about the oil and gas sector is essential to put your money down in investment opportunities that hold the potential for yield high returns in the future. A few common terms you need to know if you are thinking of energy investing in the United States or any other place are discussed in this blog. If you are looking to invest in the energy sector, read on to understand seven important oil and gas terms.

Barrel

The first term you need to know in the US oil and gas sector is ‘barrel’. A barrel is the basic unit used to measure oil. Oil output, demand, etc, are all measured in barrels. In United States, 1 Barrel is equal to 42 U.S. Gallons. Before putting your money down in an energy investment opportunity, it is advisable to do your research and know the barrel count of oil that is recoverable as well as production capacity.

Crude Oil

The term ‘Crude Oil’ refers to liquid petroleum as it is mined from the ground. Although crude oil is raw, a number of factors affect crude oil’s properties, such as viscosity and gravity. Crude oil, when refined and processed, is used to produce a number of useful fuels, such as petrol, gasoline, and other petrochemicals. When thinking of energy investing in United States, it is advisable to know which phase of the oil production you are investing in from extracting, purifying, to refining.

Downstream

The oil and gas sector is divided into three parts: upstream, midstream, and downstream. Downstream refers to all the oil and gas industry activities that occur away from the supply side. Usually, downstream activities include purifying and processing of natural gas and refining crude oil. Ascertaining the ideal oil and gas extraction process in which to invest is very important. That is why you must hire a reputable capital investment firm that can deploy its expertise to help you take the right decision.

LNG

LNG is an abbreviation for Liquified Natural Gas. Natural gas is cooled to a temperature of minus 258 degree F, converting it into liquid form. After the conversion, LNG is used for multiple purposes, such as heating, cooking, electricity generation, and other industrial uses.

Probable Reserves

Probable reserves are an estimate of reserves taken into consideration, keeping in mind a number of factors, such as geology, previous experience, and semantic data. The oil recoverability, in case of probable reserves, is uncertain. A reputable energy investing company will know different probable reserves and have the needed resources and knowledge to make an accurate estimate regarding the oil that can be recovered. Such information informs whether or not to invest in a particular opportunity.

Proven Reserves

Proven reserves refers to oil that is still in the ground and research showcases with reasonable certainty that the reserves will be recoverable in the future from known reservoirs. Till date, Saudi Arabia is known to have the most number of proven reserves, ranking number one in producing and exporting oil in the world. Instead of taking the DIY option, it is advisable to hire a professional who can help you in making calculated decisions based on substantial research.

Severance Tax

When removing any valuable mineral from the ground, a specific tax is imposed. Severance tax can be levied wither on value or volume of oil reserves. Energy investing in United States or any other place can yield high returns, but if taxes are not taken into account, a majority share is deducted from the return. The severance tax levied on different reserves has an effect on the profits that can be realized as well as returns to investors.

Wrap Up

Before investing in the oil and gas sector, remember the seven terms explained in this blog and browse the web to shortlist a few reputable energy investment companies. Choose one that has a positive track record to start your journey investing in potentially profitable energy projects and yield high, long term returns.