Downstream oil and gas production is at the opposite end of the spectrum from upstream activities. It is much closer to the end-users who purchase the final products. All downstream operations occur after the production phase and prior to the point of sale. These operations are the final step in the production process in the oil and gas industry.
The typical representatives of this process are natural gas processors and refiners of crude oil. These companies are responsible for bringing finished goods to consumers and end-users.
They are also involved in the marketing and distribution of natural gas and crude oil products. Aside from the midstream activities described previously, anything that relates to the post-production of natural gas or crude oil is considered part of downstream oil and gas activities.
Typically, you would find companies like petrochemical plants, natural gas distributors, retail outlets, oil refineries, and petroleum product distributors among the downstream companies in the supply chain.
There are a number of these downstream companies that are quite diversified and include a number of different production processes in their overall portfolio. The products that result from downstream production would include heating oil, gasoline, diesel oil, pesticides, lubricants, propane, pharmaceuticals, jet fuels, and natural gas.
With respect to accounting, the specific procedures involved in downstream oil and gas production companies again mirror the activities involved with actual production. However, efficient procurement strategies, including timely payment of vendor invoices and positive vendor interaction, are particularly impactful to the success of a downstream oil and gas company. This is a term for operations in the industry that have anything to do with the exploration and production of natural gas and oil.
Upstream businesses search for reservoirs of raw materials and extract them. They deal mainly with the initial production stages — drilling and bringing oil and gas to the surface. This segment is typically characterized by high investment capital, extended duration, high risks, and being technologically intensive. The majority of statement line items and cash flow of these businesses are directly linked to oil and gas production.
The midstream segment is mainly focused on anything that is required to transport and store natural gas and oil. Natural gas pipeline networks aggregate gas from natural gas purification plants and deliver it to downstream customers, such as local utilities.
The midstream operations are often taken to include some elements of the upstream and downstream sectors. For example upstream may include some storage functions and downstream may include some transport that overlaps into the midstream sector. This includes facilities such as petrochemical plants, oil refineries, natural gas distribution companies, retail outlets i. Many products are derived from the refining of crude oil and these may include diesel oil, liquefied petroleum gas LPG , asphalt, petroleum coke, gasoline, fertilizers, antifreeze, plastics, rubbers, pesticides, synthetic rubber, jet fuel and many more.
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