In the oil industry, one controversy has arisen and another been settled.

In January, BP announced a deal to help Rosneft, the Russian oil company, explore the Russian Arctic for oil and gas.

This has angered the local partners in TNK-BP, their existing joint venture in the Russia and discussion between the partners has become extremely acrimonious – including the issue of an injunction holding up the deal.

On the other hand Tullow Oil has just reached a settlement with the Ugandan government to finalise the purchase of assets from Heritage Oil agreed about 12 months ago and held up by a demand for capital gains tax to be paid by Heritage.

The eventual settlement involved Tullow underwriting the disputed balance of the tax bill, potentially adding to the cost of acquisition.

The point of relating these stories is to illustrate the increasing difficulty of finding resources which lie in remote geographies or potentially hostile environments physically, politically or socially.

This applies both to the oil industry and also to mining companies.

Rio Tinto recently bought a majority stake in Oyu Tolgoi (apparently pronounced “Oi-you Tall-goy”) – a large copper project in Mongolia in an area with no infrastructure, run by a government with no experience in dealing with resource projects and where they will have to mine far underground (rather than the cheaper “open cast” method).

This has meant that commodity exploration costs are rising with no end in sight, whilst at the same time the certainty of benefiting fully from any resulting profit stream is falling.

Industry analysts estimate that the exploration and development cost of a new oil field have risen by about six times over the last 15 years or so.

There is a risk that governments may change the rules on how those profits are split, even once the investment is made and profitable production is achieved, with Venezuela being a particularly egregious example.

This could be perceived as “bad” for commodity shares.

However, as long as demand outstrips supply, these extra costs will be passed on to the ultimate consumer by the resources companies.

This is currently still the situation, but the end of commodity cycles is often written in the actions of the companies.

Up until 2007, the resource companies were unusually disciplined in their spending on new projects, early tendencies to increase capital investment were stifled by the credit crunch. As a consequence, new supply has been limited.

However, now that confidence in the medium term outlook has returned, product prices have risen and cash is flowing through the door they have decided to spend again.

Resource shares look statistically cheap against their history but this maybe an illusion as cost base is rising and the risks are slowly increasing.

The party may not be over yet and may not be for the next two or three years, but it may be prudent to watch for the band playing its encores and stay a little closer to the exit door.