The oil and gas market has never looked better. Rising prices and unique tax incentives have combined to give investors some of the biggest bang for their bucks in recent years. Many analysts are now forecasting $125 per barrel for oil in the not-too-distant future. There are several ways to invest in oil and gas, such as partnerships, working interests and royalties. Of course, in order to receive royalty payments, one must own land that has producing oil and gas wells. For those who prefer to invest in oil and gas directly, partnering with a petroleum engineer or geologist can create a profitable arrangement. You as the investor put up the capital and your partner finds and develops the project in return for perhaps a quarter of its production. This business model can be very profitable. There are many oil and gas projects available for $200-300,000 that can easily be reworked to produce 10-15 barrels of oil per day which can result in gross revenues of $250-$300,000 per year. If you split the proceeds 75/25 with your petroleum partner, then you could expect to receive about 55% of the total revenue. This is after royalties and severance taxes and operational expenses have been paid, and your partner receives his share. Therefore your real return before taxes could be perhaps $135,000-$165,000. That's about 50-70% per year before taxes. Of course, this kind of investment does have its risks, but these can be managed to some extent. A key factor is to focus on developing an existing project that has proven production instead of trying to drill a well in an unexplored area. The tax advantages of oil and gas are hard to beat as well. 15% of all income from oil and gas investments at the wellhead is tax-free off the top because of the depletion allowance. Furthermore, all expenses related to drilling or operating an oil and gas project are fully deductible, either now or over the next seven years. If you would like to buy shares of a larger investment, then shares of many different partnerships are available that will pass through each investor's share of the profits (or losses) and deductible expenses.