How Midstream Oil Companies Play a Crucial Role

August 10, 2021 , oil and gas industry

An integrated oil and gas firm are basically a company entity which engages in the exploration, processing, production, and distribution of oil and gas rather than concentrating on only one particular segment. These firms are also called venture-capital firms. They can be either private companies or public. They usually have partners from different segments of the oil and gas industry such as bankers, traders, engineers, geologists, managers, suppliers, financial experts and technicians. Most of these firms also have similar business plans and they pursue similar business objectives.

The major areas of focus of midstream companies include crude oil and gas production, pipeline products, tight oil and gas production, and offshore oil and gas production. Most of the large companies usually concentrate on producing petroleum products to smaller midstream companies mainly produce gasoline and diesel. There are some exceptions such as Royal Dutch Petroleum, which has major interests in exploring for oil and gas. Most of the midstream companies have less amount of cash capital than the larger ones and hence they have to look for greater financial resources to expand their operation and to meet the increasing demands for their product.

Midstream companies have to find and develop new oil and gas fields by utilizing technology and drilling techniques. The technology should be cost effective and should not disrupt the production in any way. This is where the integrated oil industry has an advantage over other segments. With an integrated oil industry, the exploration for new areas can be done cost effectively and in the most efficient way without causing any damage to the production field.

Midstream companies generally deal in the sale of petroleum products and hence they are best placed to provide information regarding oil and gas pricing in the markets. They can give an in-depth analysis of the price trends and the factors which affect them. The price of oil and gas is largely determined by the price of the crude oil, which is refined into gasoline and diesel. Crude oil is usually bought from oil companies, which then transport the commodity to refineries and ports for storage. These companies then sell the refined fuel to consumers through gas or diesel engines.

Midstream companies also participate in the upstream exploration activities by buying natural gas leases from the producers at a reasonable price. The buyers then extract and deliver natural gas to consumers through gas pipelines. Upstream oil and gas companies engage in production, chemical processing, and various other activities related to gas and oil extraction. Apart from these activities, they also participate in the downstream operations which include transportation, retail, and lease accounting etc.

Upstream plays an important role in the overall efficiency of the oil and gas industry and hence it has great significance. With the increase in demand for petroleum products, it is expected that there would be an increase in competition among the midstream as well as the downstream players in the oil and gas industry. The increasing demand not only leads to increase in operating cost but also lead to increase in refining costs. Thus, it is expected that there would be an increase in profits and value for investments among midstream and downstream players in the oil and gas industry over the coming years.

Comments are closed.