Upstream vs Downstream Oil and Gas Operations: The Differences

When it comes to businesses in the oil and gas industry, they’re typically divided into one of three groups — upstream, downstream, and midstream operations.

What are the biggest differences between upstream vs. downstream oil and gas, though? What can professionals expect from each one, and how do they contribute to the industry in its entirety? Luckily, we’re here to help you learn more.

Read on to learn everything you need to know.

Upstream Oil and Gas

Put simply, upstream oil and gas operations deal with identifying, extracting, or producing raw materials. They’re also often referred to as exploration and production companies, and typically run things like rig operations, machine rental, extraction, and also feasibility studies.

The most prominent roles in this sector are engineering firms, scientists, drilling contractors, geologists, and even geophysicists. They’re all able to locate and estimate any reserves before actual drilling begins.

Some states have an oil severance tax set in place, and these companies are the ones that pay the fees.

Downstream Oil and Gas

Downstream oil and gas operations are closer to supplying people with petroleum products than upstream operations are, making their operations further downstream. The businesses in the sector usually include refiners and natural gas processors. The thing all these businesses have in common is that they bring usable products to consumers.

These products usually include things like diesel, gasoline, heating oil, pesticides, lubricants, propane, and even pharmaceuticals. Many companies in this sector also engage in other levels of the production process.

These businesses include oil refineries, petrochemical plants, retail outlets, and also natural gas distributors. They can also include marketing firms for these types of businesses.

Where’s the Middle Ground?

There’s also an in-between called midstream operations. It comprises the storage, processing, and transportation of petroleum products. They’re called midstream operations because they run products between upstream and downstream operations.

So, if an upstream company extracts oil from a reserve, it’s up to a midstream business to either store or delivers the final product to downstream companies where it’ll ultimately be distributed to consumers from around the world.

What Are Integrated Companies?

Many oil companies are likely to engage with more than one part of the industry, and they’re called integrated companies. Companies like BP and Shell are some of the largest integrated companies in the world.

They’re likely to have drilling operations, along with their own refineries, and also gas stations. Not every company is an integrated one, though.

Upstream vs. Downstream Oil and Gas

Learning the differences between upstream vs. downstream oil and gas is essential for learning about the industry. There are integrated companies that function in two or all three of these streams, while others only focus on one. All three play an essential role in the industry, though. Learning the differences between upstream vs. downstream oil and gas is essential for learning about the industry. There are integrated companies that function in two or all three of these streams, while others only focus on one. All three play an essential role in the industry, though.

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