If you were in the Board room of the oil giants you would know that exploration of oil is a long-term, high-risk business. Big ticket offshore projects typically take 5 years to develop from discovery and another 10 years to return the initial investment. However, as a source of profit, it can easily return 15-20%. If an oil and gas company invest in shale, the turnaround is less than a year. If an oil and gas company invest in renewables, the return is 8%, what should you do?

In an article by Ron Bousso and Nerijus Adomaitis of Reuters, according to data and industry executives, there is a return to developing offshore oil and gas projects.

When Russia invaded the Ukraine, because Russia is a large oil and gas provider, the European Community decided to embargo Russian oil and gas, the prices of oil and gas went up. Profits flowed to the companies and flushed with cash, the big oil and gas companies are drilling offshore.

Baker Hughes is a oil services firm and the number of rigs drilling is higher than prepandemic levels. Wood Mackenzie analysts project a continued increase in activity and forecasting drilling to grow 25% by 2025.

The International Energy Agency forecasts that global upstream oil and gas investments are set to increase by 11% to $528 billion in 2023.

The area that is seeing the biggest demand for offshore rigs is US Gulf of Mexico, South America and off the coast of West Africa including Namibia where Shell and TotalEnergies are drilling.

Linking to dividend paying stocks, while the world is changing, higher commodity prices drives investment levels in the mining world. With higher prices come higher rewards or higher profits and the ability to pay healthy dividends. If you invest in commodities, watch the price not the politics.

There are more questions than answers, till next time – to raising questions.