The oil and gas industry has two primary forms of companies. One of these is called an upstream company, and the other is a downstream company. There is also a middle stream company classification that links these kinds of firms together. Some oil and gas companies perform the functions of both upstream and downstream companies and even middle stream companies. A firm that has both upstream and downstream operations is Exxon-Mobil.
Upstream companies refer to companies that are close to the production part of the oil and gas industry. It is easy to remember the function of upstream companies by thinking of them in terms of being the source of the oil. The primary purpose of upstream firms is to first locate the sources of oil and natural gas in the earth and water. Their next task is to get the resources out of the ground or water and turn them into crude oil and natural gas.
Drilling wells in the ground and ocean is something that upstream companies do. The operation of oil rigs that extract the oil from the ground is also an upstream operation. Professionals involved in upstream operations include geologists, engineers, and drillers. Schlumberger is an example of an upstream company that primarily focuses on upstream activities such as exploration, drilling, and extraction.
You can think of everything occurring after the oil has been extracted from the ground as being part of the downstream cycle of the oil and gas industry. A significant part of the downstream cycle is the refining of crude oil into gasoline, diesel, propane, chemicals, and pesticides. Refineries are an excellent example of what occurs in the downstream process. They take the raw product, which is crude oil in this case, and turn it into a product that can be used by a consumer.
Another key part of the downstream process is the marketing, distribution, and sale of oil and gas products such as fuel and propane to the customers. Your local gas station and propane provider are considered to be a part of the downstream process. Marathon Petroleum and Philips 66 are excellent examples of downstream companies in the oil and gas sector.
The middle stream companies in the oil and gas industry are firms that own and operate pipelines and terminals. These firms are responsible for transporting and storing crude oil and natural gas from upstream companies to refineries that are part of the downstream process. An example of a middle stream company is Kinder Morgan.