Upstream, Midstream, and Downstream… What’s the difference?

Written by AJ Rounds

The oil & gas industry is very large and complex. It’s also essential for todays economy. No modern society can run smoothly without oil and gas. These products are in high demand in industry, commerce, retail, and commercial/domestic purposes.

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. The oil industry can be broken into three chronological sectors;

  1. Upstream
  2. Midstream
  3. Downstream

Upstream sector

Upstream is commonly known as the exploration & production (E&P) section. It covers all activities related to searching for, recovering, and producing crude oil and/or natural gas from underground or underwater fields. 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.

Some of the major activities in this sector include:

Exploration

  • Geological & geophysical (G&G) surveys are used to explore possible sites.
  • Searches for underground or underwater crude oil & natural gas fields.
  • Leases & permissions from the land owners to drill are acquired.
  • Drilling exploratory wells (costly).

Production

  • Extensive time and labor is required to drill the oil and gas.
  • Short term storage of the oil & gas.
  • Plug & abandonment finish off the well.  This is the last step in the process.  The size of the underground/water field determines the extent of this activity.

The upstream section is risky, complex, and heavily regulated by government. Outside factors that affect what happens in this sector include political instabilities in the US or abroad, international conflicts, & even seasonal weather patterns.

Midstream sector

The midstream sector connects the upstream sector to the downstream sector. Often times it is lumped in with the downstream sector. Pipelines and other transport systems can be used to move crude oil from production sites to refineries and deliver the various refined products to downstream distributors. Natural gas pipeline networks aggregate gas from natural gas purification plants and deliver it to downstream customers, such as local utilities.

Major activities involved in the midstream sector include:

  • Transportation (pipeline, rail, barge, oil tanker, and/or truck).
  • Marketing of wholesale products.

The midstream operations are often taken to include some elements of the upstream and downstream sectors. For example upstream may include some storage functions and downstream may include some transport that overlaps into the midstream sector.

Downstream sector

The downstream sector of the oil and gas industry involves the refining of the crude oil and/or raw natural gases obtained in the upstream sector as well as selling or distributing the products obtained. This includes facilities such as petrochemical plants, oil refineries, natural gas distribution companies, retail outlets (i.e. gas stations), etc. Many products are derived from the refining of crude oil and these may include diesel oil, liquefied petroleum gas (LPG), asphalt, petroleum coke, gasoline, fertilizers, antifreeze, plastics, rubbers, pesticides, synthetic rubber, jet fuel and many more.

The major activities in the downstream sector include:

  • Refining
  • Transport to retail facilities
  • Marketing the finished products

 


References:

http://globalenergy.pr.co/65678-challenges-and-solutions-in-an-upstream-and-downstream-oil-and-gas-operation

By Antonio Bhardwaj

http://www.croftsystems.net/blog/differences-between-upstream-midstream-downstream-in-oil-gas

By Amy Jerina.

https://en.wikipedia.org/wiki/Upstream_%28petroleum_industry%29

https://en.wikipedia.org/wiki/Midstream

https://en.wikipedia.org/wiki/Downstream_%28petroleum_industry%29

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