Oil and Gas Industry has three major operational stages which include the upstream, midstream

and downstream. The entire value chain of the industry from production to market / consumption
is a part of one of these three stages.

Upstream:
The activities involved in the upstream stage are:
Exploration, Drilling and Extraction (Production - actual drilling, bringing oil and natural gas
resources to the surface)

Oil formation: Remains of dead bodies sank to the bottom of the sea and due to pressure and
other factors like heat, formed oil or natural gas. Some of it gets to the surface while the rest is
trapped under impenetrable rock or clay layers or beds of oceans.
Drilling is done to dig deep to reach the layers to extract oil safely irrespective of whether it is
done onshore or offshore.

Exploration (finding oil traps): can be done by

- seismic surveys: sending shock waves down and interpreting the reflection to assess the
probability of oil
- Scent detection: electronic gadgets called sniffers are used to detect the scent of
hydrocarbons which indicate existence of oil under the surface
- Gravitational studies: gravitational fields tend to change in areas above flowing oil.
Magnetometers are used to spot changes in pull which is generally very low but can be
used for finding new sources.
- Satellite images and aerial photos
- Physical examination: this is an old method to understand the physical characteristics of
the area to identify conditions most likely to indicate trap
A core sample is taken in order to see layers under earth surface and check promising results: if
yes, additional drilling to find out how much oil and potential of the well - these preliminary steps
done to maximize profits
Next Step: Exploratory Drilling
Drilling: offshore, conventional onshore, unconventional onshore
Offshore drilling: in waters
30% global oil production comes from offshore drilling
Started from 200m deep water - 1950
Technological advances - 400 to 1500m deep - 1990s
Benchmark goal - 4000m
Wells are drilled and concrete lines the hole
Depth determined by how deep is oil present. Oil pumped out using variety of systems
depending on the specific types of platforms used for operation
Platforms: fixed platform - anchored to the ocean for shallow drilling, rigid tubes connect
wellhead to the platform to carry oil to the surface
Floating platform - used for deep water drilling using flexible risers to account for movement
that comes with being on the water; includes risers that push water and gas down to extract oil.
Other risers used to carry oil out of the water. Risers designed to keep oil warm to keep it
flowing continuously because of the temperature of water

After pumping: sent directly to shore via pipelines or stored

Onshore drilling: on land
Accounts for 70% of total global oil production
Similar to offshore drilling, but no water between platform and oil
Ground offers solid base so drilling structures and storage areas are built directly on soil
New well → crew drill below the water table → hole is encased in cement to avoid any oil seeping into
soil → drilled to appropriate depth → well uses liquids pumped into ground at high pressure levels to
remove oil from rocks

Conventional onshore drilling: Easily available, easier methods of extraction, less expensive
Unconventional onshore drilling: difficult to extract, trapped in reservoirs, extremely difficult
for oil to flow through the pores, involves hydraulic fracturing

Equipment: pumps, storage facilities and pipelines to drill and collect oil

Stability is an important factor for offshore drilling because unlike onshore drilling which gives
stability to rigs due to the earth’s surface, it tackles deep waters and waves. In order to handle
this, manmade working surfaces are required in the form of platforms: fixed or floating
depending on the location.

Identifying factor is the rig; how deep can it dig.

Types of rigs: lightweight (<=2km), medium weight (<=4km), heavy weight (<=6km), ultra-
heavy weight (>6km)
Two types of rigs: conventional: assembled on site and attached to ground; mobile: mounted
on trucks so they move to different locations: used for initial drilling and light work

Time frame: offshore drilling takes longer time (about months or years) to drill, onshore takes
only a few days

Midstream:

Anything required to transport and store crude oil and natural gas before refining, processing
into fuels and other elements
Includes pipelines and all infrastructure needed to move resources to long distances such as
pumping stations, tank trucks, rail tank cars and transcontinental tankers

Offshore storage requirements: Special equipment and methods for processing oil and
transporting it after extraction
Onshore: Many options for storage and transportation after extraction from well

Initially considered as a small part of Upstream and Downstream operations

Link between producing areas and population centers which include residential customers /
industrial refining

Midstream needs: healthy upstream supply and strong consumer demand

Operating components in midstream: Gathering, Field Processing, Transportation, Storage

across value chain

Processes can be different for Oil and gas.

1. Gathering:

Oil: moved through small diameter pipelines to central location

Gathered tanks are then sent to refinery by trucks, pipelines, barge or rail

Natural Gas: small diameter pipelines move the natural gas to a central location for processing
to remove impurities and water and separate out natural gas liquids. Natural Gas can then be
moved to large transmission pipelines to move to end user

Field processing: Process involves:

- Measurement of production rate of oil & gas and water from reservoir

- Separate O&G from waste water

- Remove impurities

- Temporarily store crude oil/gas until it is ready to be moved

Fractionation is done in order to separate natural gas liquids from production which is used as
feedstock and blend components for manufacturing of petrochemicals.

2. Transportation:

Oil: The treated Oil is delivered via huge and complex transmission pipelines and distribution
infrastructure. Crude oil can be transported through pipelines but truck and rail are more flexible
for timing and shipping to multiple destinations, hence are preferred over pipelines.

Natural Gas: Since natural gas flows at a higher pressure than crude oil, it is transported in
large diameter regulated pipelines. Liquefied Natural Gas is converted to liquids for easier
transportation and storage. The gas is cooled to -260-degree F or -162-degree C. Large LNG
vessels are used for transport.

Types of Pipelines: gathering pipelines: used for moving oil and gas from source to processing
facilities

feeder pipelines: used for moving products from processing facilities to long distance hauler
systems

transmission pipelines: used for moving from hauler systems to refineries

distribution pipelines: used for end consumption supply of natural gas included in downstream

Storage across value chain:

Crude Oil and refined products: Tank batteries, bulk terminals, refinery tank and holding
tanks

Natural Gas: Stored underground until it is transported to market. E.g. Depleted gas reservoirs,
aquifers etc.

Midstream process for Oil:

Midstream process for Natural Gas:

Downstream:
The downstream segment includes: manufacturing, petrochemical refining, distribution, and
retail
Refining:
Crude oils are mixtures of different hydrocarbons which need to be separated from each other in
order to obtain different useful components and products. This is called refining.
The resultant products are called petroleum and can be classified as light, medium and heavy
products.
Light: LPG, Gasoline (petrol), Naphtha used as paint thinner
Medium: Diesel, jet fuel, kerosene
Heavy: fuel oils, paraffin wax, tar and asphalt, petroleum coke, lubricating oils

Marketing and Retail: Petroleum product marketing is the business of finding and supplying
customers who possess either internal demand for refined fuels or distribution networks for
reaching retail customers. Direct consumers of energy products include petrochemical and
industrial manufacturers, utilities, municipalities, trucking fleets, and airlines. Other companies
may possess distribution assets or brands aimed at reaching retail end users. These companies
could include independent service station suppliers, motor oil products, home fuel oil supply
companies, propane tank distributors, and many others.

Distribution: Most widely used product is gasoline across the globe

Other traded products are diesel, jet fuel, kerosene, waxes, lubricants, medicines and cosmetics
Feedstock is traded since it is used for production of plastics, synthetic rubbers, fertilizers,
pesticides and pharmaceuticals
Natural Gas: used for electricity generation and as fuel for home cooking and heating
LNG: used to ease shipment and storage of Natural Gas
Compressed Natural Gas: used as fuel for buses and vehicles