The entire oil and gas value chain can be categorized into upstream, midstream, and downstream oil and gas operations. Here is a quick overview of these three oil and gas industry segments.
The upstream operations include all the activities and technologies involved in searching, drilling, and producing hydrocarbons in commercial quantities. Downstream operations mainly focus on refinement, marketing, and sale of natural gas, crude oil, and petrochemicals to the end consumers. However, here we focus on the midstream oil and gas industry.
So, what does midstream actually mean in oil and gas?
What Is Midstream In Oil And Gas?
As the name implies, the midstream oil and gas segment encompasses processes and facilities that place right between the upstream and downstream oil and gas segments.
Activities can incorporate processing, storage, and transportation of crude oil and natural gas. Mostly oil and gas reserves are not located in the exact geographic location of refining assets and significant consumption regions. Transportation is a considerable part of midstream activities and can include pipelines, trucking fleets, tanker ships, and rail cars.
In the USA, midstream operation is a highly regulated sector. Many federal and state regulations control the pricing and movement of oil and gas across the country via interstate pipelines and all state-level distribution by midstream oil and gas organizations within the country. The body responsible for midstream regulation is known as the Federal Energy Regulatory Commission (FERC).
Characteristics of the Midstream Segment
The midstream oil and gas segment is entirely separated from upstream and downstream in most oil organizations since it is considered a low-risk, regulated type of business.
It doesn’t fit the risk profile or asset complexity of the other segments of the oil and gas industry. Here are the external forces that affect the success of midstream:
- Upstream operations continuous delivery of reserves.
- Refinery margins that encourage refined product production.
- The health of the natural gas, downstream and petrochemical industry markets.
- Natural gas price levels that affect the attractiveness of NGL’s as feedstock.
- Political sentiment for pipeline expansion and “not in my backyard” obstacles.
Operations in the midstream industry include field processing, storage, and oil and gas transportation before actually transferring the products to the downstream players.
Oil and Gas Processing
Field processing arranges oil and gas for further refining in the downstream segment. Activities comprise product measurement, removal of impurities, separation of crude products, and temporary storage of items in containers for shipping to the oil/gas refineries.
Some percentage of hydrocarbons produced from oil and natural gas fields reach refineries for further processing. Crude oil, for example, should be refined to separate its various distillates, such as diesel, gasoline, paraffin, and heavy oils.
Midstream oil and gas consultant provides a critical balance in the supply/demand dynamics of the oil and gas trade. Large storage tanks across the country hold vast amounts of natural gas, oil, NLGs, and other petrochemicals, enabling the midstream petroleum industry to have significant control over crude oil prices.
The Strategic Petroleum Reserve (SPR) is emergency storage of oil maintained by the US Department of Energy. The current storage capacity is almost 727 million barrels, with nearly 695 million barrels (or 36 days consumption) in inventory. The SPR began in 1975 after the oil embargo of 1973-74 supply disruption.
Pipelines are one of the most prominent means of transporting hydrocarbons, particularly over longer distances. An oil and gas pipeline is a hollow tube that is made up of metal with a considerable length. When combined together and supported with pipeline pumps, they can be used to create extensive networks to transport oil and gas over great distances.
Hydrocarbon transport via pipelines is considered as one of the safest and fastest means for moving products. However, they require a substantial investment and several local and national permits to set up initially.
Transportation of Oil & Gas
Transport is an essential part of midstream oil and gas operations. The industry is vast because almost all current production is performed long distances from refining plants and product markets.
Various means of transport and interim storage like pipelines, railcars, trucks, and ships are utilized to move large natural and crude gas volumes from production fields to refinery facilities and final consumers. Let’s take a glance at how these vehicles help to transport oil and gas.
Commercial trucks are utilized mainly to transport oil and natural gas from land-based production sites to the refineries for further processing. Trucking is also helpful in hauling fluids and sand required for hydraulic fracturing.
Among all various means of oil and gas transport, trucks move the least volume of product, but they make up for flexibility. For example, there is a solid demand for competent rig truck drivers in the Texan oil fields.
Ships can carry large amounts of crude oil and natural gas held in storage containers for long distances. Large ships can significantly decrease midstream transport costs because of the sheer volume of products they carry at a time.
An excellent example is the tank barge – capable of transporting nearly 27,000 barrels of natural gas and petrochemicals to thousands of miles across the ocean to chemical refining plants. Crude oil is usually not transported by this means due to the high risks of significant environmental danger if a spill were to happen.
Railcars move oil and gas via rail since it is a relatively cheap and safe means of transport. Midstream organizations load the oil onto multiple railcars, transporting the product to a refinery or a market. A single railcar can store as much as 30,000 U.S gallons of product and serve areas without pipelines installed.
Midstream organizations render services that offer a connection between the upstream and downstream segments. Some companies mainly focus on crude and natural gas processing and storage, while others give pipeline development, logistics, railcar supply, trucking, trans-loading, and haulage services.
Choose a midstream oil and gas consultant that can offer a wide variety of skid-mounted, modular packages that are all performance-engineered and quality-assured to meet international standards.