oil refinery
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Understanding the Oil and Gas Industry

Based on the dollar value, the oil and gas industry is considered to be one of the biggest sectors across the world. You should note that oil is quite important when it comes to the global economy. That is the case with the largest oil producers in the world.

If you are an investor looking to invest in this industry, you may be overwhelmed by the unique metrics and jargon that is used widely in this industry. You can learn more from this report of Lundin consortium in Sudan. Before you get started, there is a need to know the basics of companies that operate in this industry.

What Are Hydrocarbons?

oil drillingYou should note that natural gas and crude oil are hydrocarbons. These substances occur naturally in the earth’s crust. They are formed due to the compression of organic matter in sedimentary rocks. Ideally, sedimentary rocks are deposits in ancient water bodies. Since the deposits were on the ocean floors, the organic matter got integrated into forming rock. After millions of years, the organic matter transforms into natural gas and oil.

As you know, oil has a lower density than water. Thus, it can move through porous sedimentary rocks into the earth’s surface. If hydrocarbons get trapped beneath non-porous rocks, a natural gas and crude oil reservoir is created.

Oil and natural gas get to the surface through drilling. Naturally, you need to drill past the cap rock to get into a reservoir. When you are successful with this, the productive gas or oil well can be made to pump them to the surface.

Oil Industry Segments

Upstream

These are businesses that explore and produce natural gas and oils. The companies are tasked to search for raw materials and carry out drilling. You should note that businesses in this sector have a high risk and require massive capital investment.

Midstream

oil companyThese are businesses involved in the transportation of oil and natural gas. The companies can move the crude oil to the refinery for processing. Therefore, companies in this sector are tasked with shipping, pipelines, and trucking. This sector is highly regulated and has a low capital risk. However, its success is dependent on the success of upstream companies.

Downstream

These are businesses involved in refining crude oil. In this case, the company gets rid of impurities and converts the oil to various products. Crude oil can be converted into jet fuel, gasoline, and many other products. It can also be used to make raw materials for use in the plastics industry.