Processing, transporting, refining crude oil & gas into gasoline, natural gas liquids, diesel and a variety of other energy sources as well as selling is the business of the downstream oil and gas industry. The closer an oil and gas company is to the process of providing consumers with petroleum products, the further downstream the company is said to be.
Downstream Key business sectors
1. Oil Refining
2. Supply & Trading
3. Product Marketing
4. Wholesale & Retail
Business Key Characteristics
1. A margin Business
Refinery Margin=Price realized for products – Cost of the crude
2. Very Complex
It includes diverse activities such as
Refining
Crude oil is a mixture of different compounds called hydrocarbons. Each component of each compound has its own size, weight and boiling temperature
Refineries through heat & pressure convert crude oil into separate products which result in Petroleum products
Petrochemicals
Petroleum products classified as:
Light Products (Liquid petroleum gas (LPG) – Gasoline or petrol – Naphtha used as a solvent or paint thinner)
Medium Products (Middle distillates – Diesel fuel – Kerosene and related jet aircraft fuels)
Heavy Products (Fuel oils – Lubricating oils – Paraffin was – Asphalt and tar – Petroleum coke)
Distribution
Wholesale & retail marketing
Global Perspective Important due to the impact of supply & demand on feedstock and product prices
a. Main global integrated refineries participants like bp, ExxonMobile, Chevron, Shell, Aramco, ADNOC and Total
b. Also there are Independent refiners like Enoc, Sunoco and Valero who have a chain of service stations to market their products without being involved in the E&P operations
End-user consumption
The process where the oil is refined, marketed, distributed, and sold into thousands of products to end-user customers around the globe. Also, the refining of crude oil to petroleum products may be conducted in midstream operations as well.
The downstream process is the one that provides the most products that are closely linked to consumers, and it is the sector of the oil and gas industry that people can relate to the most. Some of these products include liquefied natural gas, gasoline, heating oil, jet fuel, synthetic rubber, plastics, lubricants, antifreeze, fertilizers, and pesticides.
The downstream industry plays a key role in other sectors and industries of the economy, including the medical field. The downstream process has a big influence on some of the products and equipment needed and used by medical professionals.
Downstream process plays a key role in the agricultural sector because of its relationship to pesticides and fertilizers, as well as the fuel needed for farming equipment.
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