Upstream and downstream are two terms quite frequently used in the oil and gas industry. Simply put, upstream works include the exploration and production of crude oil and natural gas. On the other hand, downstream refers to the processes applied subsequent to extraction. It involves oil and gas being delivered to the customer in a variety of formats. The oil and gas industry is highly expansive. There are a large number of professionals working in both the upstream and downstream segments of oil and gas industry. Paul Favret also has a long-standing association with this industry. He was the CEO and founder of Source Energy Partners, an exploration and production corporation based in Denver.
Paul Favret shares a brief understanding of upstream and downstream segments of the oil and gas industry
Upstream and downstream oil and gas production basically refers to the location of an oil or gas company in the supply chain. Companies belonging to the oil and gas industry are broadly divided into three groups. These groups are upstream, downstream, and midstream. Upstream oil and gas production is conducted by firms that focus on identifying, extracting, or producing raw materials. Downstream oil and gas production companies are closer to the end consumers.
It is the responsibility of upstream oil and gas companies to identify deposits, drill wells, and recover raw materials from underground. They are quite commonly referred to as exploration and production companies as well. This segment includes certain related services like machinery rental, feasibility studies, and rig operations. Extraction of chemical supply also comes under the upstream segment.
People working in the upstream part of the industry can have a varied educational and professional background. Paul Favret, for instance, holds summa cum laude and magna cum laude in Geology and Geophysics from the University of South Carolina. Geologists, geophysicists, scientists, and seismic contractors are commonly employed by upstream oil and gas companies. A large number of service rig operators, engineers, and drilling contractors also work under this domain. The responsibilities of many of these professionals involve locating and estimating reserves. This is done before any of the actual drilling activity takes place.
The closer an oil and gas company is to providing consumers with petroleum products, the further downstream would they be in the industry. Downstream operations involve oil and gas processes that take place subsequent to the production phase to the point of sale.
The downstream segment is the final step in the production process of oil and gas. It is majorly represented by natural gas processors and refiners of petroleum crude oil. These companies are responsible for bringing usable products to the end consumers. They may even engage in the marketing and distribution of natural gas and crude oil products. On the whole, the downstream oil and gas market largely deals with the post-production of crude oil and natural gas. A large number of products used by consumers on a daily basis come from downstream operations. These products include propane, diesel, heating oil, lubricants, pesticides, pharmaceuticals, and more.