What is the difference between upstream and downstream oil and gas
Downstream industry is the portion of the oil and natural gas industry that is responsible for the refining, distributing, and retail of petroleum products. This portion of industry includes oil refineries , petrochemical plants, petroleum products distributors, and natural gas distribution companies. Downstream industry provides numerous products such as jet fuel, gasoline , diesel , synthetic rubber, plastics, pesticides, pharmaceuticals, natural gas, and propane. The different sectors within the downstream industry include: [3].
Upstream, Midstream, and Downstream… What’s the difference?
These elements are the foundation for understanding the complexities and inter-connectedness of different segments in the industry. However, there are certainly trends in oil and gas that change and are influenced by government regulations, economic trends, technological advancements, geopolitics, and other global forces.
Our oil and gas podcast network is your source of information on these current topics and trends, as discussed by industry experts with decades of experience.
Here are some podcast episodes that are directly relevant to trends in upstream and downstream oil and gas including IoT in Oil and Gas, Current Trends in Refining, Offshore and Deepwater Drilling, and more.
The oil and gas industry is like a see-saw. The low oil prices that crushing upstream economicsare a boon to downstream and petrochemical operations. Yet when most people think of the oil and gas industry, they think of upstream — searching for oil, drilling wells, and getting hydrocarbons out of the ground. There is much less common knowledge about the midstream and downstream segments of the oil and gas industry.
And yes, the wildcatter holds a special place in our imaginations. However, in order to be an educated member of the oil and gas industry, it is important that you invest time in understanding all of the segments of the industry — Upstream, Midstream, and Downstream — and how they all work together. This knowledge can be the difference between being the person on the team who stays, and the one who goes when times get tough. Oil and gas, like every other commodity-based business, is very price sensitive and is bound to experience multiple cycles throughout any single career lifespan.
Technology and regulatory changes has turned the US into a major oil producer and exporter. The more you know about how upstream and downstream are working together the better.
As you can probably imagine, the primary purpose of exploration is to discover new accumulations of hydrocarbons, called reserves. Today the larger reserve prospects are most often located in remote areas or deep water and can be tens of thousands of feet below the surface. Conventional oil and gas accumulations only occur under very precise geological conditions. Discovering these conditions requires a very disciplined analysis approach.
Improving exploration success through extensive seismic, logging and drilling technologies is discussed further in subsequent parts of the Exploration module. An Exploration Department is usually a globally centralized function which includes the following key technical disciplines and roles:. A Geophysicist uses surface methods to measure the physical properties of the subsurface in order to detect or infer the presence, position and concentration of hydrocarbons.
An Exploration Geologist identifies exploration opportunities that will contribute to the long-term established reserves replenishment goals of the companies.
A Geologist applies scientific methods to assure that all geologic factors affecting the location, design, and construction of the exploratory well are recognized. There is always uncertainty in the geological and geophysical survey results. The only way to be sure that a prospect is favorable is to drill an exploratory well. This work is done by rig contractors and service companies in the Oilfield Services business sector. Today, technologies are now available for the industry to drill wells over 25, feet, with bottom hole temperatures exceeding degrees and pressures approaching 20, PSI.
In both onshore and offshore operations, horizontal and deviated wells to maximize reservoir recovery are now the norm. Oilfield services companies design, produce and deliver both equipment and technical services needed to drill and complete wells.
In addition to the drilling rig contractor on the well-site, there can be different contractors doing technical services like cementing, perforating, logging, and testing. In a separate module, we will present more depth on the OFS equipment, technologies and processes to help you understand their contributions and the way that they have become essential to overcoming industry challenges.
The production segment of upstream oil and gas maximizes recovery of petroleum from subsurface reservoirs. Production activities include efficiently recovering the oil and gas in a producing filed using primary, secondary and tertiary, or enhanced oil recovery also referred to as improved oil recovery. Economic success of a well depends in large part on how the well is completed.
A successful completion must first make the optimum mechanical connection between the wellbore and the reservoir. The fluids then flow into the wellbore, up the tubing string and into a stock tank. When the formation pressure becomes insufficient to lift the fluids to the surface a lot of oil is still left behind. Every oil well and many gas wells will need artificial lift at some point in their producing life. Artificial lift refers to the use of mechanical devices, or artificial methods, to increase the flow of fluids in producing oil and gas wells.
Plug and abandonment marks the end of the productive life of a well. That event can occur anywhere from a few years after the well is drilled to five or six decades later. The Production and Offshore Construction Module provides a high level overview of production operations. Many products are familiar such as gasoline, diesel, jet fuel, heating oil and asphalt for roads. Others are not as familiar such as lubricants, synthetic rubber, plastics, fertilizers and pesticides. The downstream segment is a margin business.
Margin is defined as the difference between the price realized for the products produced from the crude oil and the cost of the crude delivered to the refinery. Although the price of crude sets the absolute level of product prices, it may or may not affect refining or marketing margins. Downstream margins tend to be reduced, or squeezed, when crude price increases often cannot be recovered in the marketplace. On the other hand, margins tend to hold, or even increase, when crude prices drop and the marketplace more slowly adjusts to these lower crude prices.
The downstream segment includes complex and diverse activities including manufacturing, petrochemical refining, distribution, and retail. A global perspective is important because of the global nature of the energy supply chain as well as the impact of supply and demand on both feedstock and product prices.
The complete Refining Module includes lessons on crude oil and products, refinery processes, key business drivers that impact refining profitability, and more. Crude oil cannot be used as it occurs in nature, other than burning for fuel, which is wasteful. It must be refined to manufacture finished products such as gasoline and heating oil. In the refinery, crude oil components can first be split by carefully applying heat to capture various parts, called fractions, within certain boiling ranges.
The quality of these initial fractions produced is not sufficient to be sold directly as petroleum products without further treatment. Crude oil must therefore be further processed using both heat and pressure to improve qualities and meet market demand. A large part of refinery processing is concerned with converting unwanted heavy fuel oil into marketable gasoline and diesel, using various processing methods. Volatility and trading have always been an integral part of the oil business.
Speculators would buy huge quantities of crude after an especially successful wildcat well had made the prices drop, store it in tanks and wait for the price to rise again.
JD Rockefeller realized that control of supply was the key to success in the business. He also purchased plants, warehouses, tanker cars and wagon fleets to make his company totally integrated and self-sufficient.
The main business drivers of this segment are volume, market share and margin. In the United States, passenger cars still consume more petroleum products than any other sector.
Every refiner is slightly different, but Marketing Departments are usually organized by retail and wholesale channels. In most cases, oil and gas reserves are not located in the same geographic location as refining assets and major consumption regions.
Transportation is a big part of midstream activities and can include using pipelines, trucking fleets, tanker ships, and rail cars. The midstream segment is separated from upstream and downstream in most oil companies because it is considered a low risk, regulated type of business. It does not fit the risk profile or asset complexity of the other segments of the oil and gas industry.
Upstream and downstream segments react differently to oil prices. For upstream, oil prices represent revenue, money coming in. The more you can get for each barrel of oil pulled out of the ground the better. Conversely, oil is an expense for downstream refining and petrochemical operations. These downstream operators buy oil on the open market as feedstock for their processing operations, then hope to sell products to consumers with sufficient margin to cover expenses.
When oil prices rise these downstream operators have to either raise prices or allow their profit margins to be squeezed. Of course, this overview is just beginning to scratch the surface of these segments of the oil and gas industry.
If you are looking to drill a little deeper, be sure to check out our free Oil course. If you are really the curious sort, you may want to get a glimpse at our premium e-learning courses. These oil and gas training courses include over 50 lessons covering the key upstream and midstream topics that you need to know about.
This has been really productive in the course of preparing for my masters exam. Thank you so very much, for this comprehensively detailed write up. We are getting good feedback about our materials helping people prepare for classes and interviews.
The oil and gas industry is very complex, our goal is to make it a bit easier to understand. Wao,its a very informative article. Thanks Doug stetzer. Hope to hear more soon from you…. With the challenges facing the upstream oil and gas segment, we have been encouraging our audience to brush up on their downstream knowledge.
Two recent podcast episodes touch on trends in the refining segment of downstream:. Thank you for the information. I just wish our world public was to get more educated. In our resource fields. Good information. We hope our Oil materials are helping people learn more about the oil and gas industry.
Honestly speaking, I have found it so fascinating that my tiredness got over by reading this and the mind got refreshed. The information is so productive for a quick revision. Looking forward more excellent post from you! Good Luck. Your email address will not be published. This website uses cookies to provide you with a great user experience.
The upstream industry finds and produces crude oil and natural gas. The midstream provides the vital link between the far-flung petroleum producing areas and the population The downstream industry includes oil refineries, petrochemical plants, petroleum products There are many different types of drilling rigs. Learn more about upstream and downstream, directly from industry experts! Our oil and gas training courses cover those industry topics that don't change much.
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Upstream Industry has traditionally experienced the highest number of Mergers, Acquisitions and Divestitures.
Considered being the biggest sector in the world in terms of dollar value, the oil and gas sector is a global powerhouse using hundreds of thousands of workers worldwide and generating hundreds of billions of dollars globally each year. In regions which house the major NOCs, these oil and gas companies are so vital they often contribute a significant amount towards national GDP. The energy sector has three key areas: Upstream , midstream and downstream.
Upstream Vs Downstream Oil and Gas
It is truly high risk, high reward situation. The upstream sector is arguably the most complex of the up, mid and downstream sectors. CROFT's full line catalog has all the natural gas processing equipment you need for a fully functioning well site. Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
Upstream vs. Downstream Oil & Gas Operations: What's the Difference?
No modern society can run smoothly without oil and gas. There is a long supply chain production and distribution that starts from ground exploration and ends with the consumer. This article will briefly address how that happens. This sector covers drilling of exploratory wells, and subsequent drilling and operating the wells that recover and bring the crude oil or raw gas to the surface. Lone Tree typically serves clients that operate in this sector. The oil and gas industry is constantly looking for hard working, skilled workers, to keep up with technological changes. This is where Lone Tree adds value. Providing a warm, comfortable, inviting place to eat and rest is as critical as the work itself. By doing this, the workers in the industry remain safe, healthy, and well rested for the important and labor intensive work they perform. The midstream sector connects the upstream sector to the downstream sector.
As a business owner or operations manager responsible for production, understanding the supply chain is essential to the success of your business.
Companies in the oil and gas industry are usually divided into one of three groups, upstream, downstream, and midstream. Some companies are considered to be "integrated" because they combine the functions of two or three of the groups.
Upstream (petroleum industry)
Slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. If you continue browsing the site, you agree to the use of cookies on this website. See our User Agreement and Privacy Policy. See our Privacy Policy and User Agreement for details. Published on Feb 16, In the petroleum industry, locating underground or underwater oil reserves characterizes the upstream process. Additionally, the upstream process in this industry involves bringing oil and gas to the surface. Extraction wells represent an example of a structure operating in this stage in the process. The upstream stage in the production process may also manifest itself as a supplier providing raw materials to manufacturers or other businesses that ultimately process the materials. SlideShare Explore Search You. Submit Search.
Downstream oil and gas industry
These elements are the foundation for understanding the complexities and inter-connectedness of different segments in the industry. However, there are certainly trends in oil and gas that change and are influenced by government regulations, economic trends, technological advancements, geopolitics, and other global forces. Our oil and gas podcast network is your source of information on these current topics and trends, as discussed by industry experts with decades of experience. Here are some podcast episodes that are directly relevant to trends in upstream and downstream oil and gas including IoT in Oil and Gas, Current Trends in Refining, Offshore and Deepwater Drilling, and more. The oil and gas industry is like a see-saw. The low oil prices that crushing upstream economicsare a boon to downstream and petrochemical operations. Yet when most people think of the oil and gas industry, they think of upstream — searching for oil, drilling wells, and getting hydrocarbons out of the ground. There is much less common knowledge about the midstream and downstream segments of the oil and gas industry. And yes, the wildcatter holds a special place in our imaginations.
