Both oil and natural gas are important energy sources. While some applications overlap, each asset generally plays its own role in keeping the world going.
When many people hear the word “gas,” they tend to think about the gas that powers their cars. However, it is important that mineral owners learn the differences between types of gas and their varying purposes. After all, the applications and value of these assets depend on whether they’re natural gas or oil-producing mineral assets.
Examining Oil vs. Natural Gas
While they might seem similar, gasoline vs. natural gas is very different. Only the latter is a raw material. Gasoline, which is used to fuel automobiles and other devices that rely on internal combustion engines, is not a gas at all, but a liquid. Unlike natural gas, the end product is not found in nature — it’s a product refined from oil.
If minerals produce oil, then asset owners can take that crude oil and refine it into a variety of petroleum products. Gasoline is the most commonly known oil-derived product, but oil can also be distilled into diesel fuel and oil for heating homes. (Note: Heating homes via oil is less common and more expensive than using natural gas.) Additionally, oil can be used to create commonly used plastics and nylon materials.
On the other hand, natural gas is a literal gas found under the ground. It contains a number of different compounds that can be broken down using cracking plants. Propane and methane are two well-known natural gas products. In addition to heating homes, natural gas is most commonly used for cooking and grilling food, drying clothes, and generating electricity.
The bottom line: Both oil and natural gas are important energy sources. While some applications overlap, each asset generally plays its own role in keeping the world going.
How Valuable Is Oil vs. Natural Gas?
Of course, there’s another difference that asset owners need to consider: the financial value. When it comes to pricing, there are some significant differences between the market value of finished products and the oil and gas lease price per acre.
Unlike natural gas, oil tends to operate on a global market. This means that the value of one barrel of crude oil is often significantly higher compared to one unit of natural gas. It’s important to note that one barrel of oil is equal to about six units (where one unit equals 1,000 cubic feet) of natural gas, so the difference in value between the two isn’t as stark as it may seem.
The global reach of oil, however, also means that its price is much less stable than natural gas. Over the past few years, fluctuations in global supply and demand can have a significant impact on the cost of gasoline and other oil products. When managing an oil lease, it’s important to keep an eye on the market to make the most of assets.
Managing Oil and Natural Gas Assets
Now that we’ve covered the basic differences between oil and natural gas, it’s time to move on to some final vital questions: How would someone manage these assets? Does the management process vary between the two?
Whether land produces oil or natural gas, asset owners can make the most of what they have with the right team at their side. With a partner like Valor, managing oil and natural gas assets gets a lot easier. Valor has a variety of mineral asset clients, which means that we know what to do. And when asset owners aren’t stuck in the weeds, they can focus on other priorities while maximizing their revenues.
