00:00:03.970 welcome to oil 101 today we're going to 00:00:07.21000:00:07.220 talk upstream for this downstream in the 00:00:09.87900:00:09.889 oil and gas industry the collapse of oil 00:00:14.11000:00:14.120 prices and subsequent layoffs in the 00:00:16.36000:00:16.370 upstream oil and gas sector has led to 00:00:18.91000:00:18.920 an increase in people asking what is the 00:00:21.31000:00:21.320 difference between upstream and 00:00:22.75000:00:22.760 downstream we have received this 00:00:25.03000:00:25.040 question from members in our learning 00:00:26.50000:00:26.510 community we've seen it raised in 00:00:28.42000:00:28.430 LinkedIn discussions and you can even 00:00:30.64000:00:30.650 see that upstream versus downstream is a 00:00:33.37000:00:33.380 growing inquiry in Google searches so 00:00:37.18000:00:37.190 you're not alone see the oil and gas 00:00:39.82000:00:39.830 industry is like a seesaw the low oil 00:00:42.70000:00:42.710 prices that are crushing upstream 00:00:44.41000:00:44.420 economics right now are a boon to 00:00:46.54000:00:46.550 downstream and petrochemical operations 00:00:48.81900:00:48.829 just look at the stock prices of 00:00:51.06900:00:51.079 upstream EMP operators like Continental 00:00:54.55000:00:54.560 Resources a pure-play driller up in the 00:00:56.97900:00:56.989 Bakken versus pure refineries such as 00:01:00.34000:01:00.350 Valero they're exactly inversed 00:01:02.79000:01:02.800 yet when most people think of the oil 00:01:05.29000:01:05.300 and gas industry they think of upstream 00:01:07.35000:01:07.360 searching for oil drilling wells and 00:01:10.21000:01:10.220 getting hydrocarbons out of the ground 00:01:12.06000:01:12.070 there is much less common knowledge 00:01:14.53000:01:14.540 about the midstream and downstream 00:01:16.11000:01:16.120 segments of the industry maybe it's just 00:01:19.18000:01:19.190 because there are more regulated and 00:01:20.62000:01:20.630 less exciting and yes the wildcatter 00:01:22.89900:01:22.909 holds special place in our imaginations 00:01:24.85000:01:24.860 so we're going to take some of the 00:01:27.64000:01:27.650 content from our free oil 101 elearning 00:01:30.96900:01:30.979 modules we'll talk about it here first 00:01:34.51000:01:34.520 what is upstream most oil and gas 00:01:37.30000:01:37.310 companies business structures are 00:01:38.85900:01:38.869 segmented and organized according to 00:01:41.02000:01:41.030 business segments assets or function the 00:01:44.14000:01:44.150 upstream segment of the business is also 00:01:46.75000:01:46.760 known as the exploration and production 00:01:47.98000:01:47.990 sector because it encompasses activities 00:01:50.83000:01:50.840 related to searching for recovering and 00:01:54.28000:01:54.290 producing crude oil and natural gas the 00:01:57.24900:01:57.259 upstream segment is all about the wells 00:01:59.17000:01:59.180 where to locate them how deep in how far 00:02:01.99000:02:02.000 to drill them and how to design 00:02:04.12000:02:04.130 construct operate and manage them to 00:02:07.81000:02:07.820 deliver the greatest possible return on 00:02:09.45900:02:09.469 investment with the lightest safest and 00:02:11.89000:02:11.900 smallest operational footprint 00:02:15.06000:02:15.070 upstream consists of three segments 00:02:17.85000:02:17.860 exploration drilling and production the 00:02:21.94000:02:21.950 exploration sector involves obtaining 00:02:24.31000:02:24.320 lease and permission to drill from the 00:02:26.14000:02:26.150 owners of the acreage thought to contain 00:02:28.18000:02:28.190 oil or gas it also conducts that 00:02:31.24000:02:31.250 necessary geological and geophysical 00:02:33.22000:02:33.230 surveys required to explore for and 00:02:36.13000:02:36.140 hopefully find economic accumulations of 00:02:38.95000:02:38.960 oil or gas there's always uncertainty in 00:02:42.37000:02:42.380 the geological and geophysical survey 00:02:44.62000:02:44.630 results the only way to be sure that a 00:02:46.93000:02:46.940 prospect is favorable is to drill an 00:02:49.21000:02:49.220 exploratory well drilling is physically 00:02:52.78000:02:52.790 creating the bore hole in the ground 00:02:53.98000:02:53.990 that will eventually become an oil or 00:02:56.14000:02:56.150 gas well and this work is typically done 00:02:59.11000:02:59.120 by rig contractors and service companies 00:03:01.36000:03:01.370 in the oilfield services business sector 00:03:04.05000:03:04.060 the production sector of upstream 00:03:06.99000:03:07.000 maximizes recovery of petroleum from 00:03:09.40000:03:09.410 subsurface reservoirs production 00:03:12.88000:03:12.890 activities include efficiently 00:03:14.44000:03:14.450 recovering the oil and gas in a 00:03:16.27000:03:16.280 producing field using primary secondary 00:03:19.12000:03:19.130 and tertiary or what's known as enhanced 00:03:22.69000:03:22.700 oil recovery methods plug-in abandonment 00:03:26.89000:03:26.900 marks the end of a productive life of a 00:03:28.54000:03:28.550 well and that can occur anywhere from a 00:03:30.82000:03:30.830 few years after a well is drilled to 00:03:32.29000:03:32.300 five or six decades later or more so now 00:03:36.16000:03:36.170 what is downstream processing 00:03:39.43000:03:39.440 transporting and selling refined 00:03:41.59000:03:41.600 products made from crude oil is the 00:03:43.75000:03:43.760 business of the downstream segment of 00:03:45.34000:03:45.350 the oil and gas industry the key 00:03:48.25000:03:48.260 downstream business sectors include oil 00:03:50.35000:03:50.360 refining supply and trading product 00:03:53.86000:03:53.870 marketing and retail the downstream 00:03:56.94900:03:56.959 industry provides thousands of products 00:03:58.96000:03:58.970 to end-user customers around the globe 00:04:00.99000:04:01.000 many products are familiar such gasoline 00:04:04.09000:04:04.100 diesel jet fuel heating oil and asphalt 00:04:07.00000:04:07.010 for roads others are maybe a little less 00:04:10.75000:04:10.760 familiar as a petroleum product such as 00:04:13.84000:04:13.850 lubricants synthetic rubber plastics 00:04:16.53900:04:16.549 fertilizers and pesticides the 00:04:19.81000:04:19.820 downstream segment is a margin business 00:04:21.90900:04:21.919 a margin is defined as the difference 00:04:24.40000:04:24.410 between the price realized for the 00:04:26.62000:04:26.630 products 00:04:27.65900:04:27.669 and they cost of the crew delivered to 00:04:29.58000:04:29.590 the refinery and although the price of 00:04:32.85000:04:32.860 crude sets the absolute level of product 00:04:35.30900:04:35.319 prices it may or may not affect refining 00:04:38.24900:04:38.259 or marking margins downstream margins 00:04:41.58000:04:41.590 tend to be reduced or squeezed when they 00:04:44.33900:04:44.349 crude price increases and often cannot 00:04:46.86000:04:46.870 be recovered in the market places on the 00:04:49.61900:04:49.629 other hand margins tend to hold or even 00:04:52.26000:04:52.270 increase when crude prices drop in the 00:04:55.11000:04:55.120 marketplace more slowly addresses lower 00:04:57.17900:04:57.189 crude prices so the downstream segment 00:05:00.45000:05:00.460 includes complex and diverse activities 00:05:02.26900:05:02.279 including manufacturing petrochemical 00:05:05.21900:05:05.229 refining distribution and retail the 00:05:08.96900:05:08.979 global perspective is important because 00:05:10.58900:05:10.599 of the global nature of the energy 00:05:12.33000:05:12.340 supply chain as well as the impact of 00:05:14.55000:05:14.560 supply and demand on both feedstock and 00:05:16.64900:05:16.659 product prices and of course sandwiched 00:05:19.61900:05:19.629 in the middle of these two segments is 00:05:21.05900:05:21.069 midstream so don't forget about that if 00:05:23.36900:05:23.379 you're interested in learning more on 00:05:24.92900:05:24.939 midstream you can visit our what is 00:05:27.02900:05:27.039 midstream web page or join the oil 101 00:05:29.99900:05:30.009 learning community today thanks a lot we 00:05:33.11900:05:33.129 hope you learned it a little bit about 00:05:34.67900:05:34.689 the upstream versus downstream segments 00:05:36.80900:05:36.819 in oil and gas 00:05:50.06000:05:50.070 you
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