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Oil 101:

Introduction to Oil and Gas

What is Downstream?

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Downstream

This Downstream module includes:

Introduction to Downstream

Downstream Business Characteristics

Refining – Products and Participants

Consumption – The Final Step in Adding Value

Marketing and Retail

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What is Downstream?

Processing, transporting and selling refined products

made from crude oil is the business of the downstream

segment of the oil and gas industry.

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What is Downstream?

Key downstream business sectors include:

Oil Refining

Supply and Trading

Product Marketing & Retail

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What is Downstream?

The downstream industry provides thousands of products

to end-user customers around the globe.

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Petroleum Products

Many products are familiar such as gasoline, diesel, jet

fuel, heating oil and asphalt for roads.

Others are not as familiar such as lubricants, synthetic

rubber, plastics, fertilizers and pesticides.

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Characteristics of Downstream

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Refining, A Margin Business

Refining is a margin business.

Refinery Margin = price realized for the products -

cost of the crude

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Complex, Diverse Activities

The downstream segment includes complex and diverse

activities including:

Manufacturing,

Petrochemical refining,

Distribution,

Retail.

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Oil Refining

Crude oils are not uniform, but rather are mixtures of

thousands of different compounds called hydrocarbons.

Each component of each compound has its own size,

weight and boiling temperature.

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Refineries process crude into a variety of useful products

through a number of different processing units using heat

and pressure to separate the products.

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Petroleum Products

The resulting petroleum products are often classified as

light, medium, or heavy.

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Light Products

Liquid petroleum gas (LPG)

Gasoline (or petrol)

Naphtha - used as a solvent or paint thinner.

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Medium Products

Middle Distillates

Kerosene and related jet aircraft fuels

Diesel fuel

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Heavy Products

Fuel oils

Lubricating oils

Paraffin wax

Asphalt and tar

Petroleum coke

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Participants - Integrated

Integrated Refiners:

BP - ExxonMobil - Chevron - Shell - Total

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Participants - Independent

Independent Refiners:

Valero - Tesoro - Sunoco

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Independents

Independent refiners will often have a chain of service stations to market their

products.

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What makes them an independent is the fact that they

have no E&P operations.

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Consumption

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The final link in the oil and gas value chain is CONSUMPTION.

It is the end users or customers of oil and gas products that give them their

ultimate value.

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Globally, the most widely known crude oil product is

GASOLINE.

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Other well-known crude oil products include:

● Distillate fuel oil (home heating and diesel fuel)

● Kerosene-type jet fuel

● Liquefied refinery gases

● Residual fuel oil (heavy oils used as fuels in industry, marine transportation and electric

power generation)

● Asphalt for roads

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Natural Gas Products

Natural gas products include the following:

Natural gas itself – used in electricity generation and as fuel for home heating and cooking.

Liquefied Natural Gas (LNG) – a cooled, liquefied version of natural gas used to ease shipment and

storage.

Natural Gas Liquids (NGLs) – used as raw materials in oil refining and petrochemical manufacturing.

Compressed natural gas – used as fuel for buses and commercial vehicles.

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Marketing and Retail

Product marketing is the business of

finding and supplying customers.

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These customers possess either internal demand for refined fuels or

distribution networks for reaching retail customers.

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Direct consumers of energy products include:

Petrochemical & Industrial Manufacturers

Utilities

Municipalities

Trucking Fleets

Airlines

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Other companies may possess distribution assets

or brands aimed at reaching retail end users.

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There’s More!

This Midstream material was taken from our

Oil 101: Introduction to Oil and Gascourse.

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Who are we?

EKT Interactive has been a leading oil and gas

training company since 1986.

Visit us at www.ektinteractive.com to learn

more.