What is Downstream in the Oil and Gas Industry?
In Oil and gas company in Dubai, you have two types of companies: Upstream and downstream. Upstream companies produce hydrocarbons by drilling wells in underground reservoirs, while downstream companies process hydrocarbons and turn them into higher-value products. The differences between upstream and downstream are vast, but there are similarities.
Upstream
The oil and gas industry is generally divided into three major sectors: upstream, midstream, and downstream. Upstream is the part of the industry responsible for exploring for oil and gas. Midstream is responsible for transporting the oil and gas from the place of exploration to the point where it is used for energy production. Downstream, on the other hand, focuses on marketing and selling the products.
The upstream segment is largely comprised of oil and gas exploration companies that provide oil and gas companies with the expertise they need to develop reserves. The most important activities in upstream are the identification of potential reserves and the extraction of oil from reservoirs. In the oil and gas industry, light sweet crude oils typically fetch a higher price than heavy sour grades because they yield more gasoline and require less processing. The industry also includes companies that explore unconventional resources. These include methods like hydraulic fracturing, horizontal drilling, and deep water drilling.
The downstream sector of the Oil and gas companies in Dubai involves companies that refine oil into finished products. These companies make plastics and synthetic rubber from long-chain hydrocarbons found in oil. They also play a key role in the medical and agricultural fields.
Midstream
Midstream services are integral to the production and distribution of natural gas, oil, and NGLs. The entire value chain is complex, requiring a strategic approach to ensure smooth operation. Midstream services help producers manage and maximize the value of their production, from the wellhead to the burner tip.
Midstream services include transportation, gathering, processing, storage, and export. These services are required for operations in the Marcellus/Utica shale play. Companies such as Magellan Midstream Partners are acquiring and operating a portfolio of assets to serve their clients' needs.
In recent years, midstream companies have lagged behind the overall market in investor returns. Deloitte's recent analysis reveals that the problem may lie in the way midstream companies manage their capital. While low return on capital can limit midstream companies' growth, they are able to outperform the market if they can demonstrate capital discipline.
Despite the challenging environment, the best midstream companies have ample cushion to withstand future volatility. As oil prices fall, they are also adjusting their capital spending plans, so investors are safe for the near term. However, the current low prices aren't helping their share prices. As a result, investors will need to be patient. Once these companies prove that they can withstand lower energy prices, they will be rewarded with an eventual recovery.
The midstream sector involves the transportation, storage, and trading of crude oil and gas products. Oil and gas is transported from wells to refineries and then refined. Refined products are transported to the market through pipelines, railcars, and trucks.
Downstream
The downstream oil and gas industry consists of companies that create gasoline, diesel fuel, lubricants, waxes, and specialty products. These materials are then used in petrochemical processes, as well as for manufacturing thousands of other products. Lastly, these companies sell and market these products to end users.
The downstream oil and gas industry is a global industry. Its main goal is to transform crude oil into finished products. These refined products are then sold to both wholesale and retail markets. For the most part, these products are sold as gasoline, diesel, and jet fuel. Petroleum products are also used for the manufacture of motor oil, lubricants, and plastics.
The downstream business has seen strong growth in recent years, largely due to low feedstock prices and healthy demand for transportation fuels and chemicals. However, the recent healthy growth is not necessarily a sign of better times to come. The industry is facing some long-term challenges. These challenges will continue to affect downstream companies.
Conclusion
While addressing the industry's environmental impact is vital, most businesses aren't considering it as a priority. As a result, they often fail to take into account environmental concerns, while neglecting their bottom line. However, the downstream oil and gas industry can help maximize profits while reducing CO2 emissions.
