Oil 101: Introduction to Oil and Gas - Midstream What is Midstream? This Midstream content is derived from our Oil 101 Midstream ebook and can be found in our oil and gas learning community. This Midstream module includes the following sections (use the links below for quick access): Midstream Business Characteristics Midstream Participants Processing – The Next Step in Adding Value Transportation Storage Midstream - As its name implies, the midstream segment encompasses facilities and processes that sit between the upstream and downstream segments. Activities can include processing, storage and transportation of crude oil and natural gas. In most cases, oil and gas reserves are not located in the same geographic location as refining assets and major consumption regions. Transportation is a big part of midstream activities and can include using pipelines, trucking fleets, tanker ships, and rail cars. The midstream segment is separated from upstream and downstream in most oil companies because it is considered a low risk, regulated type of business. It does not fit the risk profile or asset complexity of the other segments of the oil and gas industry. Success in the midstream segment depends on many external forces including: -Upstream operations continuous delivery of reserves -Refinery margins that encourage refined product production -Health of the downstream, natural gas, and petrochemical industry markets. -Natural gas price levels that impact the attractiveness of NGL’s as feedstock -Political sentiment for pipeline expansion and “not in my backyard” hurdles While the midstream gathering and processing sector is relatively free of commercial regulation, the movement of gas by interstate pipelines and subsequent state level distribution activities are highly regulated in the US by the Federal Energy Regulatory Commission (FERC).

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Oil 101:
Introduction to Oil and Gas
What is Midstream?

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What is Midstream?
This Midstream module includes the following sections:
Introduction to Midstream
Midstream Business Characteristics
Midstream Participants
Processing – The Next Step in Adding Value
Transportation
Storage

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Midstream
As its name implies, the midstream segment encompasses
facilities and processes that sit between the upstream and
downstream segments.

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Midstream Activities
Activities can include processing, storage and
transportation of crude oil and natural gas.

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Location, Location,
Location...

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In most cases, oil and gas reserves are not located in
the same geographic location as refining assets and
major consumption regions.

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Characteristics of the Midstream Segment

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Low Risk
The midstream segment is separated from upstream and
downstream in most oil companies because it is considered
a low risk, regulated type of business.
It does not fit the risk profile or asset complexity of the other
segments of the oil and gas industry.

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Highly Regulated
The movement of gas by interstate pipelines and
subsequent state level distribution activities are
highly regulated in the US by the Federal Energy
Regulatory Commission (FERC).

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Processing

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Processing
Processing oil and gas liquids into marketable products is
the beginning of the midstream segment of the business.

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Field Processing
Field processing is the first phase of oil and gas
processing,
starting in the onshore or offshore production field.

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Field Processing
Here, surface facilities are designed and installed that:
Measure the production rate,
Separate the oil, gas, and water,
Remove impurities,
Temporarily store the crude or gas.

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Fractionation
Fractionation plants, which remove natural gas liquids
(NGL) from the produced oil and gas are also a component
of the midstream activities.
These NGLs are used as blend components in a refinery
and used as fuel or feedstock in the manufacture of
petrochemicals.

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Transportation

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Transportation
After field processing, treated oil and gas is delivered via a
complex transportation, transmission and distribution
infrastructure.

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Pipelines
Crude and refined liquids start their journey in a spider web
of small-diameter field gathering pipelines.

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Marine Transportation
Once accumulated, larger volumes are transported
internationally in tankers or vessels and moved along the
coast or through rivers in smaller barges.

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Land Transportation
Land transportation methods include
pipelines, truck and rail.

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Natural Gas Transportation
Natural gas, which flows at much higher pressure than
crude oil, is most often transported in large-diameter
pipelines called transmission lines.

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Pipelines, Trucks, and Railroad
While pipelines are the safest and most efficient way to
transport oil and gas, trucks and rail are more flexible in
terms of timing and destination.

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Crude by Rail
The recent growth in domestic US production has led to an
expansion of crude-by-rail shipments since many new
fields are not connected to existing pipeline infrastructure.

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NGL vs LNG
NGL is an acronym for Natural Gas Liquids – the liquid
hydrocarbons normally associated with natural gas.

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The most common NGLs are
methane,
ethane,
propane,
butane.

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NGLs
NGLs are much more valuable as raw material for
further processing than as fuel for simple combustion.

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LNG - Liquefied Natural Gas
LNG is an acronym for Liquefied Natural Gas –
the gaseous portion of natural gas (mostly the methane
and a little ethane) in the liquefied state.

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LNG - Liquefied Natural Gas
LNG is an efficient way to move, transport and handle
large quantities of natural gas.

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Storage

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Storage - Crude Oil
Storage facilities for crude oil and refined liquids
include:
bulk terminals,
refinery tanks,
holding tanks.

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Strategic Petroleum Reserve
The Strategic Petroleum Reserve (SPR) is an emergency
storage of oil maintained by the US Department of Energy.

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Strategic Petroleum Reserve
Current storage capacity is approximately 727 million
barrels, with about 695 million barrels (or 36 days
consumption) in inventory.

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Strategic Petroleum Reserve
The SPR was started in 1975
as a result of the oil embargo of 1973-74.

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Storage - Natural Gas
Because of its extremely high pressure,
natural gas must be stored in
underground reservoirs
until it is ready to be transported to market.

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Storage - Natural Gas
Most commonly depleted gas reservoirs are used,
with salt caverns and aquifers being other
storage possibilities.

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Introduction to Oil and Gas
This Midstream material was taken from our
Introduction to Oil and Gas course.

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