Introduction
The US tops the list of top gas and oil producers, supplying 18.88 million barrels of crude oil daily. In fact.
Just the top 10 oil-producing countries rolling out 95.95 million barrels of oil per day, it would be an understatement to say that the oil and gas industry is a big one. To put things into perspective, 3% of the world's GDP comes from oil and gas.
And with the industry seeing a CAGR rate of 25.5%, there is yet much to learn about the oil and gas industry.
Three Stages Of Gas and Oil Industry
The oil and gas sector can be roughly grouped into three main divisions composing of:
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These sections get named according to their gas and oil production and supply chain position.
For example, the term upstream denotes its place as the first step in:
- oil production,
- exploration,
- extraction.
The other two oil production sectors follow suit by being second and third respectively in the supply chain position.
But to get a detailed understanding of the oil and gas industry, more awareness is necessary. And this includes knowledge of the contributions of the businesses and service providers who play invaluable roles in all three sections of the industry.
Upstream
The upstream sector encompasses the initial steps of oil and gas production. This sector involves a fair amount of research and land profiling because the crude products must first be discovered to get extracted. Consequently, one of the essential tasks of this division is exploration.
Extraction
The raw oil and gas reserves are typically found under hundreds of feet of rock or even under the seafloor, and it is the upstream sector that takes on the drilling operations.
Upon finding the oilfield, the extraction process begins.
Who does it involve?
Normally, it involves the participation of drilling companies, transport providers, equipment companies, and more.
Drilling time depends on the nature of the oil and gas reserve.
For example, if the crude product is buried under a shale formation, drilling companies can access it in just a few weeks and have it online in less than a year.
But for offshore oilfields, the same may take over four months at double the cost. When the drilling companies finally reach the reserves, crude oil and gas finally see the light of day.
Connected Services
The upstream sector relies heavily on the following service providers for this process.
- drilling contractors to help access the oilfields
- operators providing funding
- oil service companies providing staff
- equipment manufacturers like pipe companies
- security firms for protection
No matter how rich an oil reserve is, all projects will be a failure if the upstream sector does not have access to high-grade pipes from oil service companies or even a reliable drilling team.
The involvement of these smaller businesses is not only good but also crucial for economies. And with the participation of such a varied range of businesses, the oil and gas industry is expected to be worth an astonishing $252560 million by 2028.
Midstream
The midstream sector takes over the work after discovering and drilling reserve-rich oilfields. For the product to be marketable, it must first be purified and refined in special facilities, and this section is responsible for the transmission of crude oil and gas to these places.
Role of Transport
As a result, the midstream sector of the gas and oil industry relies heavily on transport services and companies to help move their product. Trucking companies, railroad services, and even barges and tankers provide invaluable service in ferrying the product to and from refineries.
Access to reliable transport services is essential because the midstream sector isn't only concerned with taking the crude oil and gas to the refineries. It is also responsible for transmitting the purified product from these facilities to storage plants, consumers, and downstream marketeers.
Pipelines
Aside from the conventional transport services, pipelines also play a seminal role in the midstream sector's movement of products. The pipeline companies use narrow, low-pressure pipes to carry oil from oil wells to refineries.
Sometimes these pipes also join up with other long-haul pipelines to help carry this product over long distances, even across continents.
Use of Tech
Carrying out all these tasks requires heavy coordination between the transport, the refining, the storage, and the marketing teams. Automation and technological aids help bridge this gap by ensuring the efficiency of these processes.
Many technological solutions get implemented to help these projects move along smoothly. This improves communication between different teams, safety measures in facilities, and more.
Tech service providers work alongside the teams to ensure optimal communication between teams. Many advanced monitoring systems are also put to work to check the proper functioning of equipment.
These measures help regulate the pressure in the pipelines carrying oil while ensuring no leakage anywhere along the pipelines.
Summary Of Role
To summarize, the midstream sector deals in the following oil and gas production steps.
- Crude material collected from the reserves and oil wells
- Transport unpurified oil and gas to facilities and carry clean products from this facility to the distributors or storage. This step involves transport services like a truck, tanker, railroad, barge, and more.
- Refining of the crude oil and gas at special facilities. Other elements may be added to the product to improve its quality. At the same time, new materials may also be produced from the extracted substances.
- Storage is crucial because not all refined gas and oil get sold immediately. Most of these products will be stored at nearby facilities and accessed later. So, after refining, trucks, and rail carry the finished products to special terminals and reservoirs.
- Use technical solutions to combat problems with communication, efficiency, and management.
Service Providers
The midstream sector work, therefore, involves invaluable contributions from the following service providers.
- Transport companies
- Refinery facilities
- Pipeline management
- Storage teams
- Transloading companies
- Tech companies
Downstream
The downstream oil and gas sector includes elements of the midstream and vice versa, especially regarding refining crude oil into derivatives. Though purification can be categorized as a midstream process, it is usually regarded as the downstream sector's responsibility.
Production
Pipelines carry raw oil and gas from oil wells into refineries for refining. Here the crude materials undergo several refining processes, including compression, hydro-heating, hydrotreating, and amine testing.
The end product of this refining is the materials commonly associated with the industry, like heating oil, gasoline, LPG, natural gas, and more. In addition, the materials extracted during processing are also the basis of products like waxes, lubricants, and sulfur. And
Aside from refining, the main focus of downstream oil and gas is the post-production activities. The refined crude oil and gas products get transported by trucks and barges to storage facilities and terminals or by pipelines directly to the consumers.
The downstream sector is responsible for marketing and selling these products to the customers. Since much of the focus of this section of oil and gas is on marketing, it employs the help of service providers like:
- Asset inspection services for testing and certification
- Pipeline transport companies
- Oil service companies provide labor, equipment, tech, and more.
- Storage and transport teams
- Product distributors and delivery companies
- Marketing teams
Importance Of Service Providers
None of the processes involved in the upstream, midstream, and downstream sectors of the oil and gas industry would be possible without the aid of the service producers.
Each department plays a crucial role in the gas and oil supply chain, from lorry drivers to pipeline producers to distribution partners.
The enormous scale of this three-fold process, with the participation of many specialized service providers, highlights the importance of the oil and gas industry to the country's economy.
The three sectors employ and support a large percentage of the population, playing an invaluable role in the economic stability of countries.