What are Midstream Oil Operations?
Midstream oil operations are one of the three stages in the oil and gas energy operations. The other stages include upstream and downstream.
The initial phase in oil and gas operations is known as the upstream operations, which includes activities involved in drilling and producing hydrocarbons in large quantities. Midstream is the second phase, and it involves the processing, storage, and transporting of oil, natural gas, and natural gas liquids to refineries.
Midstream operations also involve treating the products to remove waste, and compressing it before it is transported to the markets downstream, i.e., end-users. The final phase of oil and gas operations is downstream operations, which involve the refinement, marketing, and distribution of crude products to the final consumers.
The end-users include power plants, export facilities, factories, homes, etc. In the downstream phase, the crude oil is refined into diesel, jet fuel, gasoline, and other fuels for use in vehicles, airplanes, and homes, among other uses.
- Midstream is a phase in oil production that involves the processing, storage, and transportation of oil and gas to refineries and end-users.
- The midstream phase is one of the three phases in oil and gas operations, with the others being upstream and downstream operations.
- Companies that handle all the three stages in oil and gas energy operations are known as integrated oil companies.
Understanding Midstream Oil Operations
The midstream phase serves an important role in the oil and gas energy operations. It helps transport the raw crude oil produced in oil fields, and transform it into usable crude products that can be used by end-users. The midstream sector serves three main functions – processing, transportation, and storage and logistics.
The process starts at the upstream phase, where, after drilling and extracting oil, the miners use a pipeline to transport the raw hydrocarbons from the well into a central facility. The facility then stores the hydrocarbons, from where it is processed and separated into various components. The processed products flow further downstream through a pipeline, road, or railcar for storage and further processing into usable materials that are ready for consumption by the end-users.
The main types of companies operating in the midstream oil operations phase include integrated and independent midstream companies. Integrated oil companies combine upstream, midstream, and downstream activities in their operations to maximize every unit of oil and gas that they produce.
Independent midstream companies provide services to companies engaged in oil and gas operations that need access to midstream assets. In the United States, some policies regulate the movement of oil and gas via interstate pipelines. The Federal Energy Regulatory Commission is responsible for formulating policies in the midstream phase.
Steps in Midstream Oil and Gas Operation Value Chain
The following are the main processes in the midstream sector:
1. Field Processing
When oil is extracted from an oil field, it comes out as a mixture of oil, natural gas, and natural gas liquids that flow into a gas-oil separation unit. The unit separates water and oil from the natural gas mixture. The water is recycled or pumped into a disposal well, while oil, gas, and natural gas liquids flow to the respective storage units.
Other activities that occur in field processing include product measurement, removal of waste products, and temporary storage of products before they are transported to the refineries.
Storage plays an important role in maintaining a balance in the supply and demand of oil in the international market. The storage tanks hold large volumes of oil and gas, and this gives market players an advantage in determining oil prices in the market.
If the storage tanks run out of oil and gas supply, the petroleum industry will exercise minimal control only in determining market prices for petroleum products. In such a case, the international market producers will achieve significant control over the price of crude oil and its refined products.
Transportation is an important component of the midstream sector since crude oil and gas must be transported to other locations for further refining and subsequent distribution to the final consumers. The main forms of transporting crude oil and gas include pipeline, truck, rail, and ships.
Crude oil, gas, and natural gas liquids are transported from the production fields to an offsite temporary storage facility and transported to a large storage hub for refining. Once they are refined, the end products – such as gasoline, LPG, diesel, and jet fuel – are transported again to end-users such as homes, factories, and gas stations.
Pipelines are the most common means of transporting crude oil and gas over long distances since they are safer and faster compared to rail and trucks. Trucks are used to transport oil and gas from production facilities to refineries or from refineries to the end-users. Although trucks move the lowest volume of petroleum products, they compensate for the inflexibility of other means of oil transportation, such as pipelines and ships.
Railcars are considered a cheap means of transporting oil and gas since the products can be loaded onto multiple railways for further transportation to a refinery or storage facility.
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