Oil and Gas Overview 2019

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In 2019, the oil and gas sector recovered, especially the oil
markets from the depths of the post 2014 downturn.
Since 2016, oil prices have recovered from $40, reaching
$67 in Sep, 2018.
The recovery happened due to several factors. One of
them is the success of the production restraint agreement
between OPEC and non-OPEC countries, which is in force
since the beginning of first half of 2017.
Other factors that influenced the recovery of the oil and
gas markets are the less oil coming to the market from
challenged producers and the ongoing global demand
growth estimated by the EIA.
EIA stands for Energy Information Administration, and the
global demand growth for 2018 was estimated at 1.6
million b/d.
Oil & Gas Recovery

Oil & Gas Industry in 2019
In the latest Deloitte annual survey, they asked oil, gas and chemicals
executives the following question:
As we move into 2019, what should we watch for? Does the
recovery in oil markets have legs, or are emerging risks coming
into play?
The questions resulted with a confidence in recovery, which results
with high expectations for increased economic growth, commodity
prices and investments overall.
This is supported by the increase in energy demand above the
average levels, as the US and global economy continue to display
strong growth rate.
In the following slides we can elaborate in more details about the
top 10 trends in the Oil and Gas Industry, presented by GlobalData
researchers.

The main trend in the Oil and Gas Industry to watch for in
2019, is the Oil and Gas supply. There are several problems,
that will influence the Oil and Gas supply, the problems
with Venezuela and Iran, as well as Qatar’s exit from OPEC.
The second trend to watch for is the Energy Outlook. In
the past couple of years, the input of gas influencers online,
industry whitepapers and journalism give a better and
more realistic, expert overview of what is happening and
future expectations in this sector.
Energy policies are the third trend listed in the GlobalData
research, which includes the decisions, from the US
Department of Energy and by other organizations as well.
Oil & Gas Industry Trends in 2019

What will influence the oil production in 2019, is the rise of
the federal oversight regarding the methane and wastewater,
and the return of more autonomy to Oil-production parts in
the United States.
What can make the situation unpredictable, are the changes
to the ranks of OPEC, especially in the part of how the
countries manage their energy policies, as well as the
political situation in the UK that can affect the policies
related with the North Sea oil exploration and nuclear
energy in Scotland.

Many are anticipating the Natural Gas supply to be at the forefront and
expecting that in 2019, the global LNG supply will outstrip demand, for
few reasons. One is the development in China, of their own Natural Gas
Infrastructure and the investments in LNG imports.
Next comes, the output of OPEC as a trend. As it has been stated in the
beginning of this article, the OPEC has committed to pulling oil from the
market. The reduction in oil production, still doesn’t scare many experts
in the industry.
Other identified top trends are related with the Oil Price, Fracking, Oil
Demand and inventories of oil, natural gas and goal. You can read more
for these trends on the link.

Oil and Gas Supply Chain
The oil and gas global supply-chain includes activities
such as domestic and international transportation,
ordering and inventory visibility and control, materials
handling, import/export facilitation and information
technology.
The Oil and Gas Supply Chain can be analyzed through
three different industry sectors:
•Upstream
•Midstream
•Downstream
Every Supply Chain in large industries involves
configuration, management and continuous improvement
of sequential set of operations that includes multiple
parties.

Upstream vs Midstream vs Downstream sector
The upstream sector is also known as the E&P (Exploration and
Production) sector.
It is consisted of processes and operations that involve 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.
In recent years, there is an evident shift towards the inclusion of
unconventional gas as part of the Upstream sector. This also
affects the developments in processing and transporting
Liquefied Natural Gas (LNG).
1. Upstream

2. Midstream
The midstream sector is usually combined in the literature with the
downstream sector.
This segment in the supply chain, involves the transportation,
storage and marketing of various oil and gas products.
Transportation options can vary from small connector pipelines to
massive cargo ships making trans-ocean crossings, depending on
the commodity and distance covered.
When we are discussing the transportation of oil and natural gas,
most oil can be transported in the current state, while the natural
gas must be liquefied or compressed.

3. Downstream
When it comes to the downstream sector, it encompasses
the refining, processing, distillation and purification before
turning it into usable, sell-able and consumable products e.g.
fuels, raw chemicals and finished products etc.
All the afore-mentioned services transform crude oil into
usable products such as gasoline, fuel oils, and petroleum-
based products.
Retail marketing activities help move the finished products
from energy companies to retailers or end users.

Upstream Oil and Gas Sector
The Upstream sector is the part of the oil and natural gas industry that is responsible for finding crude oil and
natural gas deposits, along with producing them. It is also known as the exploration and production or E&P sector.
This part of the petroleum industry includes all activities that happen out in the field including drilling wells, trucking
supplies, and mining oil sands, as well as activities that involve different environmental studies and research analysis.

Upstream Sector Characteristics
This segment of the oil and gas supply chain focuses and operates around the wells, meaning it cares about where to locate
them, how deep and far to drill the wells, how to design, construct, and manage them.
The four major business characteristics that describe the upstream segment are as follows:
•Carries high risk
•Gives high return
•Highly regulated, it is affected by global politics
•Hi-technology and capital-intensive

Upstream Sector Characteristics
The different sectors within the upstream segment include:
•Offshore drilling
•Oil sands mining
•Supply and service
•Manufacturing
•Seismic surveys
•Geological surveys
•Reclamation

Exploration, (Drilling) and Production (E&P)
The exploration phase first starts with activities of the operator to
obtain a lease and permission to explore, from the owner of
onshore or offshore acreage that might contain oil or gas.
This also includes activities of collecting geological, geophysical and
geochemical material as well as different descriptions and maps of
old mineral localities.
Geologists and geophysicists play a major role in this phase,
because they use different methods and techniques, such as seismic
surveys, satellite images, magnetometers, air guns, explosives and
seismometers, in order to assess the presence of hydrocarbons or
minerals.

Exploration, (Drilling) and Production (E&P)
When the potential site is confirmed, the drilling of an exploratory well begins, process that is also known as drilling wild
cat.
These activities need to check the physical presence of reserves, so it can decided if additional exploratory wells should be
drilled in close location. This way the scientists can confirm and evaluate the entire potential of the reservoir.
Production phase includes extraction of the hydrocarbons, separating the mixture of liquid hydrocarbons, gas, water, and
solids, and removing of constituents that cannot be sold. The sites used for production can often handle crude oil from
more than one well.
After production, an additional phase appears called abandonment, which happens when a well lacks the potential to
produce economic quantities of oil or gas, or when a production well is no longer economically viable.

Upstream Sector Companies List and Categorization
There are four major groups of companies that can be identified in the upstream sector of the oil and gas supply chain:
•Majors, such as ExxonMobil, BP, Chevron and Shell.
•NOC’s (National Oil companies) who are owned by governments,
•Independents – the independence comes from not being integrated into other segments.
•Oilfield services companies – These companies offer services, equipment and different technical skills
If you want to see a larger list of oil and gas companies in the upstream sector, check the following links on Wikipedia:
List of oil exploration and production companies
List of oilfield service companies

Midstream Main Functions
Gathering, Processing and Transportation
First step in the midstream sector is gathering oil and gas that is produced in the upstream sector.
Oil is moved through a web of pipeline, with a small diameter, directly to a central location.
When it comes to gathering natural gas, the process is a little bit different, meaning the gas cannot be stored at or near
the well and for that reason needs to be purified and processed to remove the water and other impurities. Once the
NGL’s are separated, then they can be sent through large diameter pipelines.
Next comes the field processing, as the first phase of oil and gas processing starting in the onshore or offshore
production field.

During field processing, surface units need to be installed. These facilities should do the following activities:
•Measure the production rate of the oil, gas and water that is produced from the reservoir
•Separate the oil, gas and water from one another
•Remove impurities to prepare the crude or gas for sale or the next process
•Store the Crude or gas temporarily, long enough until is ready to be moved to the next process

The above described process is known as fractionation.
Fractionation by definition is the separation or removal
process in which certain quantity of a mixture into a
smaller quantities, called fractions, in which the
composition varies.
The separated NGL’s (natural gas liquids) can be blend
components in a refinery and used as fuel or feedstock
in the manufacture of petrochemicals.
The treated oil and gas, after the fractionation process,
should be transported through a complex network of
transportation and distribution infrastructure either for
storage or further processing.

When it comes to transporting crude oil, the most used and safest method is pipeline transportation.
More flexible way of shipping crude oil is truck and rail, in terms of timing and close alternative locations.
For transporting natural gas, the most used method are large diameter pipelines, because natural gas flows at a much
higher pressure than crude oil. LNG is natural gas that has been changed to a liquid form, so it can easier to transport it or
store it.
After transportation, comes the storage as a step in the midstream activities. Storing crude oil and refined products is very
different from the methods used to store natural gas.
Storing natural gas, is very demanding due to high pressure of the natural gas and for that reason is kept underground,
until it is ready to be delivered to market. Common storage facilities are salt caverns, depleted gas reservoirs, and aquifers.

Crude oil and other refined products are stored using the
following methods:
•Field tank batteries
•Product Bulk terminals
•Refinery and holding tanks

Midstream Companies List – Key Players
These are the top 10 midstream companies in 2018:
•OAO Transneft
•Enterprise Products Partners
•Plains All American
•TransCanada
•Kinder Morgan
•Spectra Energy
•Upltrapar Holdings
•Enbridge

Downstream Oil and Gas Sector
The downstream sector is the last one in the oil and gas supply chain, and encapsulates the operations that take place
after the production phase right to the point of sale to the end consumers.
Here are included the processes of refining crude oil and distributing its byproducts (gasoline, NGL’s, diesel, jet fuel,
heating oil etc.) up to the retail level and selling to end consumers.
Other products which are not that familiar are lubricants, synthetic rubber, plastics, fertilizers and pesticides.
These products are called petrochemicals. The downstream sector has important role in the pharmaceutical, packaging
and manufacturing industries.

Downstream Sector Characteristics
The main business characteristics about the downstream sector is that
it is margin business, which has high complexity, companies should
always have the global perspective in mind and it includes working
with marketing and delivery of final products to retailers and end users.
When discussing about the downstream being a margin business, it
defines the margin as the difference between the price of the products
from the crude oil and the cost of the crude oil that is delivered to a
refinery.

Key downstream sectors include:
•Oil Refining
•Supply and Trading
•Product Marketing – Wholesale and Retail
The complexity of this chain segments is due to the inclusion of different range of activities such as refining,
petrochemicals, distribution, wholesale and retail marketing.

Key Downstream Players
Key Downstream Players
There are two type of companies that compete in the downstream sector, known as integrated companies and
independents.
The companies that are called integrated, are known for having business operations not only in one specific sector, but are
present in both upstream and downstream segments of the oil and gas supply chain.
One of the top integrated oil companies in the downstream sector are: Exxon Mobil, Chevron, BP, Shell, and Total.
There are also companies called independents, due to the fact that they don’t have upstream, E&P operations. These
independents, are independent refiners which can have different range of service activities and stations to market their
products.
Famous independent downstream companies are: Andeavor (formerly Tesoro), Valero Energy Corporation, Sunoco etc.

Refining, End user consumption and Wholesale and Retail Marketing
Refining represents the processes that enable crude oil compounds, called hydrocarbons, to be broken down and
separated as byproducts, with the use of heat and pressure. The byproducts or final petroleum products that have resulted
from the refining process can be categorized in three major categories: Light, medium and heavy.
The light group of the chemicals, are the first ones that evaporate and usually are lately processed into liquid petroleum or
naphtha. Hydrocarbons from the middle category, also known as middle distillates-produce jet fuel and kerosene while
the heaviest group of hydrocarbons, form residual fuel oil.
The marketing activities in the downstream segment refer to the processes of promoting, searching and supplying
customers who have internal demand for refined fuel products or who have large wholesale networks that can distribute
the different product to variety of retailers.

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