Investing in Oil Sector Companies – Peak Oil

The era of cheap oil and natural gas is over and we’re in the middle of one of the most powerful bull market cycles of the 21st century. There are no major pockets of untapped “easy” oil left to be exploited. In other words, the easy and cheap-to-recover onshore oil fields are mature and, for the most part, already seeing declining production.

The world’s new potential growth plays in oil: deepwater reserves, Artic reserves, oil sands and other technically more-difficult-to-produce reserves. For such resources to be developed, crude oil prices will need to average well north of $55 per barrel.
Deepwater is one of the most interesting and important new oil exploration and production stories of the next few years. The 2007-08 period will be a key growth period for deepwater developments; we’re now entering the sweet spot of deepwater production growth thanks to the large deepwater exploration and development investments of the past five years.

I fully expect further announcements along the lines of last year’s Chevron /Devon Jack Field deepwater well test in the Gulf of Mexico. The announcement of new deepwater discoveries and successful well tests will help catalyze interest in deepwater.

As such, companies that are leveraged to ongoing deepwater developments will be one of the top oil and gas-related themes for investors. Check out the chart below for a closer look.

Market Oracle