Professionals working or aspiring to work in the oil & gas industry should be aware of the oil and gas industry overview. They must know the working cycle of the industry and the responsibilities of the different sectors involved in the process. This article will provide a brief introduction to the oil & gas industry and the key points related to it.
Oil & Gas Industry Overview
The oil and gas industry is one of the largest industrial sectors in the world in terms of generating value in dollars. This is also known as the petroleum industry.
This industry is very crucial to the global economic framework especially for countries like the United States, Saudi Arabia, Russia, Canada, and China. Petroleum is important to many industries and is necessary for the operating and maintenance of Industrial plants, machines, and transportation purposes.
Brief History of Petroleum
Petroleum is a naturally occurring liquid found in the rock formations. It consists of a mixture of hydrocarbons of various molecular weights, plus other organic compounds. It is widely known and accepted that oil is generated from the carbon-rich remains of ancient plankton after exposure to pressure and heat in Earth’s crust over hundreds of years.
Different Sectors of the Oil & Gas Industry
Oil & Gas Industry has been divided into the following sectors-
- Upstream oil and gas
- Midstream oil and gas
- Downstream oil and gas
Upstream Oil and Gas
Upstream Oil and Gas consists of companies involved in the exploration, extraction, and separation of oil and gas. These companies are also known as the E&P (exploration and production) industry. These are the companies that find the place of exploration, and set up the plant with the co-ordination of the local government and start exploring. If the oil is found beneath the earth then the extraction/production of oil starts otherwise the company will move to the next place for exploration and later on, the separation takes place. This is done either onshore or offshore.
The upstream oil and gas companies are characterized by high risks, high investment capital, extended duration as it takes time to locate, documentation procedures, and drill.
What do you mean by exploration, extraction, and separation?
Exploration can be defined as a means to provide the required information to exploit the best opportunities presented in the choice of areas and to manage research operations on the acquired blocks, which also involve the statutory activity.
An oil company may work for many years on a proposed area before an exploration well is prepared and during this period the geological history of the area is studied. Indeed, exploration is a risky activity and the management of exploration assets and associated operations is a major task for oil companies.
The extraction of petroleum is the process by which usable petroleum is drawn out from beneath the earth’s surface location through the well.
Liquid hydrocarbons/Oil extracted from the wells are separated from the non-saleable components such as water and solid residuals. Natural gases are often processed onsite while oil is piped to a processing unit for separation.
What do you mean by onshore and offshore?
The meaning of Offshore is the islands in the open sea belonging to a country. The setup installed in the ocean on the floating platform for the extraction of the oil is called offshore.
Onshore means the setup installed on dry land for oil extraction /drilling/production. Onshore drilling accounts for 70 % of the total oil production.
Midstream Oil and Gas
Midstream Oil and Gas are those companies that are focused on transportation and storage. They are responsible for moving the extracted raw materials from upstream industries to refineries to process the oil and gas. Midstream oil and gas companies are characterized by shipping, trucking, pipelines fleets, and storing of the raw materials. The midstream oil and gas sector is also marked by high regulation, particularly on pipeline transmission, and low capital risk. This sector is also naturally dependent on the success of upstream oil and gas companies.
Key Points of Midstream Oil and Gas
- Midstream oil and gas refers to the stage in the oil production process that falls between upstream and downstream.
- Midstream Oil and gas includes key activities like storage and transportation of the Crude Oil.
- They are specialized in storage and fleet management.
Downstream Oil and Gas
Downstream Oil and Gas are those which are responsible for processing, transporting, marketing, and selling of the refined products made from crude oil. It is dependent upon upstream and midstream oil and gas sectors. Thousands of products to end-user/ customers around the globe are provided by the downstream oil and gas industry. Many products are familiar such as gasoline, diesel, jet fuel, kerosene, heating oil, and asphalt for roads, etc.
Key Points of Downstream Oil and Gas
- Downstream oil and gas operations are the processes that deal with converting Crude oil into finished products.
- Companies that handle operations in the downstream oil and gas sector are closest to the customers.
- An over-production of crude oil in the upstream section may benefit the downstream oil and gas companies.