Detailed explanation of the oil and gas value chain. The upstream, midstream and downstream sectors of the value chain has been described.

1. 1 OIL AND GAS VALUE CHAIN
The oil and gas value chain starts with searching for potential underground or
underwater oil and gas fields and ends with providing products to end consumers. The
different sections of the oil and gas value chain are:
 Upstream
 Midstream
 Downstream
The upstream, midstream and downstream sectors are described below. Figure 1-4
provides an overview of the Oil & Gas Value Chain.

2. Figure 1 Oil and gas value chain

3. Figure 2 Gas value chain
Exploration
and Production
from Oil &
Gas Reservoir
Separation &
Stabilization
Gas
Dehydration,
Treatment &
Conditioning
Gas
Compression
Onshore Gas
Processing
Plant (GPP)
where
fractionation
takes place
Gas
Oil
Water
Midstream
Surface Oil & Gas Production (FPSO)
Sub-surface
Downstream
Distribution
and
Utilization
Upstream

4. Figure 3 Gas value chain

5. 1.1 UPSTREAM, MIDSTREAM AND DOWNSTREAM PARTS OF THE VALUE CHAIN
Figure 4 Upstream, midstream and downstream parts of the value chain
1.1.1 Upstream
The oil and gas industry is usually divided into three major sectors: upstream, midstream
and downstream. The upstream oil sector is also commonly known as the exploration and
production (E&P) sector.
The upstream sector includes the searching for potential underground or underwater crude
oil and natural gas fields, drilling of exploratory wells, and subsequently drilling and
operating the wells that recover and bring the crude oil and/or raw natural gas to the surface.
With the development of methods for extracting methane from coal seams, there has been
a significant shift toward including unconventional gas as a part of the upstream sector,
and corresponding developments in liquefied natural gas (LNG) processing and transport.

6. 1.1.2 Midstream
Midstream operations are sometimes classified within the downstream sector, but these
operations compose a separate and discrete sector of the petroleum industry. Midstream
service providers apply technological solutions to improve efficiency during midstream
processes. Technology can be used during compression of fuels to ease flow through
pipelines; to better detect leaks in pipelines; and to automate communications for better
pipeline and equipment monitoring.
For example, natural gas from upstream Surface Gas Production is supplied to the GPP at
Atuabo (Midstream) from the Jubilee and/TEN field. The gas is exported from the FPSOs
at about 150 Barg pressure and is received at the GPP inlet between 130 – 140 Barg
pressure. The products obtained from processing (fractionation) of this raw gas at the GPP
are;
 Lean Gas (Sales gas) – this is made up of mainly methane (CH4) and small
percentage of Ethane (C2H6). This is transported at a pressure of about 50 Barg on
the onshore pipeline to Ghana Gas’ TRMS, and subsequently to Aboadze for power
generation, and industrial customers for heating purposes.
 Liquefied Petroleum Gas (LPG) – made up of Propane (C3H8) and Butane
(C4H10). This is transported by Dedicated Bulk Road Vehicles (BRVs) from
Atuabo to various retail outlets operated by Oil Marketing Companies for domestic
and commercial use.
 Condensate – Also known as Natural Gasoline. Also transported by Dedicated
BRVs from Atuabo to Tema Oil Refinery (TOR) to be used as feedstock for
blending into other petroleum products.

7.  Iso-pentane – There is an ongoing project to commercialize this product. Iso-
pentane means isomer of pentane
Midstream operations and processes include the following:
1. Gathering
The gathering process employs narrow, low-pressure pipelines to connect oil- and
gas-producing wells to larger, long-haul pipelines or processing facilities.
The first consideration in gas gathering is the proportion of liquid which will flow
with the gas. If this is high, gas flow becomes impeded by slugs of liquid and special
facilities must be installed for its collection and separation. These problems may be
serious in hilly country or offshore environments with deep seabed trenches.
The other major considerations are functions of pressure, temperature, or their
interaction. High pressure is generally desirable since it can be used to drive the gas
to a more distant location. However, excess pressure may need dissipating, in which
case heaters may also be required to counteract the accompanying chilling effect
which could result in hydrate temperatures will generate the need for special
facilities to overcome metal expansion.
2. Processing/refining
Processing and refining operations turn crude oil and gas into marketable products.
In the case of crude oil, these products include heating oil, gasoline for use in
vehicles, jet fuel, and diesel oil. Oil refining processes include distillation, vacuum
distillation, catalytic reforming, catalytic cracking, alkylation, isomerisation,
hydro-treating.

8. Natural gas processing includes compression; glycol dehydration; amine treating;
separating the product into pipeline-quality natural gas and a stream of mixed
natural gas liquids; and fractionation, which separates the stream of mixed natural
gas liquids into its components. The fractionation process
yields ethane, propane, butane, isobutane, and natural gasoline.
Figure 5 Schematic flow diagram illustrating process route and
ultimate products of produced oil and gas
3. Gas treatment
Gas treatment is to remove undesirable components and to separate the well stream
into saleable gas and petroleum liquid, recovering the maximum amounts of each
at the lowest possible cost. The individual steps will typically include:
a. Separation: in vessels designed to slow the passage of liquid to allow
gravity to separate the well stream into gaseous, liquid and solid

9. components. Stage separation allows the collection of individual LPG and
condensate streams if present in sufficient quantity.
b. Filtration: in separators designed to remove small liquid and / or solid
particles using a series of perforated cylinder baffles with fabric and
fibreglass coverings.
c. dehydration: in vessels where the gas is either bubbled through a liquid
such as glycol or passed through a bed of granulated solid material such as
silica-gel, both of which have an affinity for water and which can be easily
regenerated for cyclical use.
d. Acid gas removal: Acid gas removal refers to an industrial gas purification
procedure used to remove hydrogen sulfide (H2S) and carbon dioxide (CO2)
from mineral resources. Acid gas removal involves the use of aqueous
solutions (amines) that react with the existing mixture. This practice is vital
because hydrogen sulfide promotes corrosion of any metal process vessel it
is housed or transported in. Acid gas removal may also be known as gas
sweetening, amine scrubbing or amine gas treatment.
e. BTU Control: necessary as increasing amounts of C2+ components are
removed from the stream, leaving predominantly methane which may fall
below the contractual specification for heating value. In these situations, it
may be necessary to limit such extractions or blend with other, richer gases.
f. Compression: to enable gas to flow, by enhancing inherent well head
pressure or simply to counteract friction through long pipelines.
4. Transportation

10. Oil and gas are transported to processing facilities, and from there to end users,
by pipeline, tanker/barge, truck, and rail. Pipelines are the most economical
transportation method and are most suited to movement across longer distances, for
example, across continents. Tankers and barges are also employed for long-
distance, often international transport. Rail and truck can also be used for longer
distances but are most cost-effective for shorter routes.
5. Storage
Midstream service providers provide storage facilities at terminals throughout the
oil and gas distribution systems. These facilities are most often located near refining
and processing facilities and are connected to pipeline systems to facilitate
shipment when product demand must be met. While petroleum products are held in
storage tanks, natural gas tends to be stored in underground facilities, such as salt
dome caverns and depleted reservoirs.
1.1.3 Downstream
The downstream sector involves the refining of petroleum crude oil and the processing of
raw natural gas. It includes the selling and distribution of processed natural gas and the
products derived from petroleum crude oil such as liquefied petroleum gas (LPG), gasoline
(or petrol), jet fuel, diesel oil, other fuel oils, petroleum asphalt and petroleum coke.
The downstream sector includes petroleum refineries, petroleum product distribution, retail
outlets and natural gas distribution companies.

11. 1.1.3.1 Marketing
Marketing is defined as the performance of business activities that direct the flow of goods
and services from producer to consumer in order to satisfy customers and accomplish the
firm’s objective.
Marketing of petroleum products involves distribution to Bulk Distribution Companies
(BDCs) and Oil Marketing Companies (OMCs) such as GOIL, BOST, Shell, Total and all
other local distribution/marketing companies, who then distribute the product to
consumers.
For descriptive and analytical purposes, it is often convenient to categorise uses of natural
gas in terms of four main markets- domestic (or household), commercial, industrial
(including chemical feedstock uses) and power generation. The definition of these four
markets is generally self-explanatory, with the exception of the commercial sector. This is
something of miscellany-covering schools, hospitals, offices, shops, hotels and the like.
Channel through which natural gas are marketed includes:
 Domestic market
 Commercial market
 Industrial market
 Chemical feedstock – fertilizer production,
 Export
 Power generation
The consumption of total gas demand by market sector varies enormously between
different countries and geographical regions. This reflects a large number of factors such

12. as population density, climate, stage of industrial developments and national energy policy,
as well as the price and availability of alternative fuels. For example, in countries such as
UK, where as much as 70% of natural gas is supplied to the domestic and commercial
sector. Elsewhere in Western Europe and in the USA, the industrial market is relatively
more important. Power generation generally still accounts for a minor portion of the total
gas market in these countries, but this appears set to change in countries as diverse as Italy,
Portugal, the UK, and the US. In Japan, and Ghana, by contrast, power generation is already
by far the most important end-use sector. Ghana uses natural gas mainly as a fuel for
cooking, transport, power generation and industry.
1.1.3.1.1 Domestic market
The three major uses of natural gas in residential premises are cooking, water heating, and
space heating. In much of the developed world, it is supplied through pipes to homes, where
it is used for many purposes including ranges and ovens, gas-heated clothes dryers,
heating/cooling, and central heating. Heaters in homes and other buildings may include
boilers, furnaces, and water heaters.
1.1.3.1.2 Commercial market
Commercial uses of natural gas are very similar to residential uses. The commercial sector
includes public and private enterprises, like office buildings, schools, churches, hotels,
restaurants, and government buildings. The main uses of natural gas in this sector include
space-heating, water heating, and cooling. For restaurants and other establishments that
require cooking facilities, natural gas is a popular choice to fulfil these needs. Another
technological innovation brought about is combined heating and power (CHP) and
combined cooling, heating and power (CCHP) systems, which are used in commercial

13. settings to increase energy efficiency. These integrated systems are able to use energy that
is normally lost as heat. For example, heat that is released from natural gas powered
electricity generators can be harnessed to run space or water heaters, or commercial boilers.
Using this normally wasted energy can dramatically improve energy efficiency.
1.1.3.1.3 Industrial market
Turning now to the industrial market, it is convenient to consider the sector in terms of four
principal categories as discussed below.
1. There are certain direct process or space heating applications for gas which require
a high quality, high value fuel. This may be a matter of requiring clean energy (eg.
No sulphur content), or perhaps of needing controllable point-of-use heat which
cannot be provided by coal, for example. This high grade, high value uses for gas
are often referred to as “premium” applications.
2. There are other industrial energy applications where only a low-grade source of
heat is required. This includes the raising of steam, for which lower value fuels such
as heavy fuel oil or coal are generally sufficient. To distinguish this part of the
market from the higher value applications for gas, it is often referred to as “non-
premium”.
3. A specific application of gas which has somewhat special characteristics is the on-
site production of combined heat and power (CHP). Effectively, gas – based CHP
is an alternative to purchasing (high value) electricity from the public grid and
raising steam on-site with (low value) heavy fuel oil or coal. In this sense, CHP is
something of a “hybrid” between premium and non-premium usage.

14. 4. The fourth category to be considered is the non-energy use of natural gas a
feedstock for ammonia or methanol production. There is often no other
economically attractive feedstock and the alternative to gas-based production may
well be to purchase the chemical end product on the open market.
Since each of the four categories set out above has its own characteristics, we consider
them separately in turn below.
As outlined above, the premium applications for natural gas in the industrial sector mainly
comprise direct process use and space/water heating. In light industries, the space and
water heating requirements may dominate, but in more energy-intensive sectors (steel, food
processing, ceramics, chemicals, etc.) the process load is much more important.
Given relatively high cost of alternative fuels (e.g. Gas oil and especially electricity), the
market value of gas is higher than in the non-premium industrial sub-sector. On the other
hand, consumers bulk purchase requirements and (as regards electricity) relatively flat load
curves enable them to obtain much lower prices than domestic or commercial users.
Consumers who can use LPG (propane or butane) are often able to obtain very attractive
prices in today’s oil market conditions. Thus gas market values tend to lie between those
of the domestic/commercial markets and those in the non-premium industrial market, but
can be quite variable across industrial customers of different sizes and types. In some cases,
(eg. Food processing and firing of ceramics) there can also be a product quality premium
value of natural gas, as compared with other fuels.
“Premium” industrial consumers can vary enormously in size, from small workshops
taking only several thousand therms per year to major energy-intensive businesses
consuming 100million therms or more across several sites. In developed gas markets the

15. average premium industrial customer may be quite small- e.g. 100-200,000 therms pa-
while the average size in new gas markets (e.g. Nigeria or the middle east) tends to be many
times greater.
Seasonal load factors (average daily consumption divided by peak daily consumption) also
vary from perhaps 60% in a developed industrial market with significant space heating
demand to around 80-90% where process users dominate and space heating requirements
are not significant.
In many countries, most larger industrial customers tend to be supplied from medium
pressure (e.g. Regional) transmission grids, although some very large users may be
connected direct to the high pressure system. In some older gas industries with long-
standing local networks inherited from town gas days (e.g. UK and Germany), however, a
significant proportion of industrial customers may be connected to the distribution system.
Partly because they are often served direct from the transmission system and partly because
of relatively high load factors, “premium” industrial customers are typically much cheaper
to supply than domestic or commercial gas users.
1.1.3.1.4 Gas export market
Countries with large recoverable gas reserves relative to their potential domestic market
are likely to consider export market options. This applies, for example, to current exporters
such a s Norway, Algeria, Indonesia, and Canada as well as to prospective future exporters
such as Oman, Venezuela and Mozambique.
There are essentially two options open to potential exporters – namely pipeline exports and
liquefied natural gas (LNG). The pipeline option is technically most straightforward and

16. is clearly the most appropriate for land routes. By the use of large pipes diameters (eg.
56”). Gas can even be moved in large volumes over very long distances (eg. West Siberia
to western Europe, Nigeria to Ghana) in a reasonably economic manner. Technological
developments allow subsea pipelines (eg. Trans-Mediterranean, between Tunisia and Italy)
to be constructed in fairly deep waters. High operating pressures such as 200bar for the
Norwegian Zeepipe) can be used to keep down the unit costs of subsea pipeline
transportation. Subsea pipelines are however very expensive and are not economically
attractive over extremely long distances.
1.1.3.1.5 New markets for natural gas
To complete the discussion of gas market options, we now review briefly some of the
emerging markets for gas which are not currently significant but which may be so in the
future.
1. Compressed natural gas (CNG) as an automotive fuel.
2. Processes have also been developed to convert methane to gasoline, and thus to
substitute conventional oil-derived fuel. Recent experience with the SASOL
Mossgas plant in South Africa suggests that this is not economic at today’s fuel
prices unless a country possesses very large gas reserves relative to the potential
market – which mean a low opportunity cost of gas feedstock.
3. The third possible new market for gas is fuel cells – equivalent to a large battery –
which are alternative to conventional power generation. Phosphoric Acid Fuel Cells
(PAFCs) are the best developed technology but Molten Carbonate Fuel Cells
(MCFCs) have a higher efficiency potential and both could be “fuelled” by natural
gas. The big advantages of fuel cells are their high efficiency (especially MCFCs)

17. and benign environmental impact (no emissions of SO2 or CO2). However, their
commercial viability remains to be proven – especially as regards the capital cost
of large-scale facilities and the cost/frequency of fuel stack replacement.