(1) A global industry focused on producing and delivering petroleum and natural

gas products.

This defines the oil and gas (O&G) industry. It involves the entire process from locating
underground resources (exploration), extracting them (production), transporting them, refining
them into usable products like fuel and chemicals, and finally distributing them to consumers and
industries. The industry operates globally, with companies and infrastructure spanning
continents.

(2) A key driver of global energy, economy, and industrial growth.

Oil and gas are major sources of energy used in transportation, electricity, heating, and
manufacturing. They also support countless industries through petrochemical products (e.g.,
plastics, fertilizers, synthetic materials). Economically, the sector provides jobs, generates
government revenue, and influences global markets and geopolitics. It’s foundational to both
developed and emerging economies.

(3) O&G has three segments:

 a. Upstream
This segment focuses on exploration and production. It includes searching for oil and
gas fields, drilling wells, and bringing raw hydrocarbons to the surface.
 b. Midstream
This part handles the transportation, storage, and wholesale marketing of oil, gas, and
refined products. It includes pipelines, shipping, and terminals that move resources from
production sites to refineries or end-users.
 c. Downstream
The downstream segment involves refining crude oil, processing natural gas, and
marketing and selling finished products like gasoline, diesel, jet fuel, and
petrochemicals to consumers and businesses.

1. Upstream – "Find & Produce"

This is the first stage, where oil and gas companies focus on:

 Exploration: Using geological and geophysical techniques (like seismic surveys) to

locate underground oil and gas reserves.
 Drilling & Production: Once a potential site is found, wells are drilled to extract crude
oil and natural gas. The raw hydrocarbons are then brought to the surface.
 Field Development: Infrastructure like rigs, wellheads, and gathering systems are
installed to manage ongoing production.
Upstream activities are capital-intensive and risky but offer high potential returns if commercial
quantities are discovered.

2. Midstream – "Move & Store"

This stage connects upstream production to downstream processing and distribution. It includes:

 Transportation: Moving crude oil and natural gas from production fields to refineries or
processing plants via pipelines, tankers, rail, or trucks.
 Storage: Holding oil and gas in terminals or tanks before further processing or sale.
 Processing (sometimes included): Some light processing or gas treatment may occur to
remove impurities before delivery.

Midstream ensures smooth flow and availability of resources across long distances, often across
countries and continents.

3. Downstream – "Refine & Deliver"

This is the final stage, focusing on:

 Refining: Crude oil is processed in refineries into various usable products such as
gasoline, diesel, jet fuel, and asphalt.
 Natural Gas Processing: Removing impurities and separating useful components like
methane, propane, and butane.
 Marketing & Distribution: Selling refined products to businesses and end-users via
retail fuel stations, wholesalers, or industrial supply.

Downstream is where the majority of consumer interaction occurs — it transforms raw

hydrocarbons into products people and industries rely on daily.

Value Creation Across the Chain

Each segment adds value:

 Upstream creates value by discovering and unlocking energy resources.

 Midstream adds value through safe, efficient delivery and infrastructure.
 Downstream captures value by transforming resources into finished, marketable
products.

This entire chain forms the backbone of the global energy system.
Exploration

This is the first and most uncertain stage of upstream activities. Companies invest in:

 Seismic surveys – Using sound waves to map underground rock formations and identify
potential oil and gas reservoirs.
 Geological studies – To assess the structure and potential of hydrocarbon-bearing
formations.
 Wildcat drilling – Exploratory drilling in unproven areas, with high risk but potentially
high rewards.

The goal is to find commercially viable accumulations of oil and gas.

Production

Once a viable reservoir is discovered, the production phase begins:

 Drilling wells – Can be located onshore (land-based) or offshore (in oceans/lakes).

 Artificial lift systems – Techniques like gas lift, rod pumps, or electric submersible
pumps used to help bring oil to the surface, especially when natural pressure is low.

Production includes not just extraction, but also separating oil, gas, and water before they’re sent
through the value chain.

Strategic Value of Reserves

 The size and quality of a company’s proven reserves (oil and gas that can be recovered
with reasonable certainty) are critical.
 These reserves are a key factor in determining a company’s market value, future
revenue potential, and investment attractiveness.
 Investors and stakeholders closely watch reserve growth as an indicator of long-term
sustainability.

A. Transportation
Midstream transportation ensures that oil and gas move safely and efficiently from production
sites to processing or refining facilities.

 Pipelines
The backbone of midstream transport.
o Crude oil pipelines transport unrefined oil.
 o Natural gas pipelines carry dry gas.
o Product pipelines carry refined products like gasoline or jet fuel.
 Tankers
Used especially in international transport.
o Crude carriers move large volumes of unrefined oil.
o LNG tankers (Liquefied Natural Gas) transport natural gas in liquid form across
oceans.
 Rail and Trucking
Used when pipelines are unavailable or for shorter distances.
o Offers flexibility but is more expensive and less efficient.

B. (Light) Processing
This occurs mainly for natural gas before it enters pipelines:

 Natural Gas Processing Plants

These facilities clean the gas and make it suitable for transportation and sale.
 Processes include:
o NGL Recovery: Extracting valuable hydrocarbons like ethane, propane, butane.
o Contaminant Removal: Removing unwanted substances like CO₂, H₂S, water,
and solids.

This ensures the gas meets quality standards for transport and use.

C. Storage

Midstream also handles temporary holding of oil and gas during supply-demand mismatches or
logistical delays.

 Crude Oil Storage Tanks

Surface tanks that hold crude oil before it’s sent to refineries.
 Underground Gas Storage
Used to store natural gas in depleted reservoirs, salt caverns, or aquifers.
o Helps balance seasonal demand (e.g., high winter usage).

🔁 Summary

Midstream = Transport + Storage + (Light) Processing

 Segment Function

Transportation Moves crude, gas, and refined products to market

Storage Temporarily holds supply to match demand/timing

Processing Prepares raw gas for safe, efficient transportation

A. Refining
What happens here:

 Crude oil distillation: Crude oil is separated into different components (fractions) based
on boiling points in a distillation column.
 Conversion processes: After distillation, heavier fractions are converted into lighter,
more valuable products using processes like cracking, reforming, and hydrotreating.

Key outputs:

 Gasoline (petrol)
 Diesel
 Kerosene/Jet fuel
 Fuel oil
 Lubricating oils
 Asphalt
 Feedstocks for petrochemicals

Refining makes raw crude oil usable and valuable to both consumers and industries.

🔹 B. Distribution & Marketing

This part connects products to end-users through:

 Retail distribution:
o Filling stations (petrol stations) sell gasoline and diesel to individual consumers.
 Wholesale/bulk supply:
o Large quantities are sold to industrial users, transport companies, power plants,
and governments.
o Delivered by pipelines, trucks, rail, or ships.
Marketing also involves:

 Brand management (e.g., Shell, Mobil)

 Customer engagement and retail strategies

Downstream companies often compete directly in this space.

🔹 C. Petrochemicals

Why is this included in downstream?

Petrochemicals are produced using specific fractions of crude oil or natural gas (like
naphtha, ethane, or propane), which are obtained during refining or gas processing.

These feedstocks are further processed in petrochemical plants, often located adjacent to
refineries.

Common base chemicals:

 Ethylene
 Propylene
 Benzene
 Toluene
 Xylenes

End-uses:

 Plastics (e.g., polyethylene, polypropylene)

 Fertilizers (e.g., urea, ammonia)
 Pharmaceuticals, detergents, synthetic fibers, solvents, and adhesives

👉 That’s why petrochemicals are considered part of the downstream sector — they are
refined derivatives of crude oil or natural gas, processed and marketed just like fuels.

✅ Summary Table

Segment Activities Output Products

Refining Distillation & conversion Gasoline, diesel, kerosene, lubricants

Distribution Retail & wholesale delivery Fuels and oil products to end-users
 Segment Activities Output Products

Petrochemicals Chemical conversion of oil/gas feedstocks Plastics, fertilizers, pharma ingredients

1. Integrated Oil Companies (IOCs)

✅ Example: ExxonMobil, Shell, Chevron, BP

 These are private, investor-owned companies.

 They operate across all three sectors:
Upstream, Midstream, and Downstream.
 Their goal is to maximize profit across the entire value chain.

For example: Shell explores for oil, transports it via its own pipelines, refines it in its own
refineries, and sells it at Shell-branded petrol stations.

🔸 2. National Oil Companies (NOCs)

✅ Example: Saudi Aramco, NNPC, Petrobras, ADNOC

 These are state-owned companies, usually run by national governments.

 They often own or control the majority of a country's oil and gas reserves.
 NOCs control about 75% of the world’s oil reserves.
 Their goals often include:
o Revenue generation for the country
o Energy security
o Employment and industrial development

Example: NNPC in Nigeria manages oil production, partners with private companies, and
handles local refining and distribution.

🔸 3. Independents

✅ Example: Seplat (Nigeria), Apache (USA), Aiteo

  These are smaller, private companies that typically specialize in upstream operations
(exploration and production).
 They don’t own refineries or retail outlets.
 They often operate in niche areas or marginal fields.
 May partner with NOCs or IOCs to develop specific assets.

Example: Seplat focuses on producing oil and gas from fields in Nigeria without being involved
in refining or distribution.

🔸 4. Service Companies

✅ Example: Schlumberger, Halliburton, Baker Hughes

 These companies do not produce or sell oil and gas.

 Instead, they support the operations of producers by offering services like:
o Drilling
o Logging
o Reservoir analysis
o Well completion
 Think of them as the technical backbone of the upstream sector.

For example: Halliburton helps Exxon drill wells but does not own the oil.

🔷 Diagram Suggestion (for Slides)

Create a matrix like this to show each company type and where they operate in the value chain:

Company Type Upstream ✅ Midstream ✅ Downstream ✅

IOCs (Shell, Exxon) ✔️ ✔️ ✔️

NOCs (NNPC, Aramco) ✔️ ✔️ ✔️

Independents (Seplat) ✔️ ❌ ❌

Service Companies ⚙️(support) ❌ ❌

⚙️= Provide services but don’t own or operate assets

✅ Final Summary
This slide shows:

 How different companies participate in the industry.

 The strategic scope of their operations.
 The importance of both producers and enablers (like service companies) in keeping
the industry running.

Here's a breakdown of Slide 8: Key Challenges in the Oil & Gas Value Chain, clearly
explained by category:

🔹 1. High Capital Costs & Long Project Cycles

 Oil & gas projects (like offshore drilling or refineries) require billions of dollars and take
years to plan, build, and operate.
 This makes investment risky and slow to adjust to market changes.

Example: An offshore platform might take 5–10 years from exploration to first oil.

🔹 2. Oil Price Volatility & Geopolitical Risk

 Oil prices fluctuate due to supply-demand imbalances, OPEC decisions, conflicts, or

global events (e.g., pandemics).
 Many producing regions face political instability, affecting operations and supply
security.

Example: War in a key oil-producing country can spike prices or disrupt exports.

🔹 3. Environmental Pressure & Emissions Targets

 There's increasing global pressure to reduce greenhouse gas emissions and transition to
clean energy.
 Companies face strict regulations, climate activism, and the need to decarbonize
operations.

Example: Refiners are now investing in carbon capture and biofuels.

🔹 4. Talent & Technology Gaps in Digital Transformation

 The industry struggles to attract young talent due to its image and competition from
tech sectors.
 Also, many companies lag in adopting modern digital tools like AI, automation, and
data analytics.

Example: Some fields still rely on manual operations where digital solutions could boost
efficiency.

📘 Day 7: Profitability and Industry-Wide Challenges

 I learnt how each sector generates revenue—through asset sales, transport tariffs, product
margins, and global trading.
 The lecture explored how trading arms leverage price differences across markets for
financial gains.
 I understood key challenges such as oil price volatility, capital-intensive projects, and
tightening environmental regulations.
 We discussed the urgent need for digital transformation and talent development in an
evolving energy landscape.