Midstream Oil Operations
What is midstream?
Midstream refers to the segment of the oil and gas industry that handles processing, storage, transportation, and marketing of petroleum, natural gas, and natural gas liquids (NGLs). It links upstream activities (exploration and production) with downstream activities (refining and retail), providing the infrastructure and services that make physical movement and commercial distribution possible.
Core functions
- Transportation
- Pipelines, maritime tankers, barges, railcars and trucking for crude oil, refined products, gas, and NGLs.
- Storage and terminals
- Tank farms, marine terminals and underground caverns that balance supply and demand, enable seasonal stocking, and support trading.
- Processing
- Gas processing (removing impurities, separating NGLs), stabilization of crude and intermediate product conditioning.
- Commercial services
- Blending, additive injection, inventory management, and terminalling services for refiners, marketers and traders.
Business models and ownership
- Integrated oil companies: Many global oil firms combine upstream, midstream and downstream operations under one corporate structure and report transportation and production costs together.
- Pure-play midstream companies: Standalone firms that focus on pipelines, storage terminals and related services. In North America these are common and often investor-owned.
- State or government ownership: In some regions, especially parts of Europe, key pipelines and storage assets are controlled by governments or state-owned enterprises, reducing the prominence of independent midstream operators.
Regional differences
- United States and Canada
- A well-developed, largely privately owned midstream sector with extensive pipeline networks and independent terminal operators.
- Midstream often operates as a distinct commercial sector between producers and refiners.
- Europe
- Transportation and storage are frequently integrated with upstream producers or operated by state-controlled entities.
- Midstream is less commonly a separate line item in the industry value chain.
Real-world examples
- Keystone Pipeline System: A cross-border pipeline system connecting Canadian production to U.S. markets, illustrating pipeline-driven crude transport.
- Magellan Midstream Partners: Example of a terminal and storage operator that runs multiple marine storage terminals, offering distribution, blending, storage and inventory services for refiners and traders.
- Other named midstream firms include Oasis Midstream Partners, Sanchez Midstream Partners, Hess Midstream, and EQT Midstream Partners (examples of companies that have focused on pipeline and storage assets).
Why midstream matters
- Logistical backbone: Midstream infrastructure enables producers to reach markets and refiners to access feedstock reliably.
- Market access and pricing: Bottlenecks, pipeline constraints or storage shortages can affect regional price differentials and product availability.
- Investment and operational risks: Midstream assets are capital-intensive and subject to regulatory, environmental and commercial risks; ownership structure and regional regulation influence returns and strategy.
Key takeaways
- Midstream connects upstream production to downstream refining and end markets through transport, storage, processing and commercial services.
- The sector is distinct and well-developed in North America but often integrated with production in Europe.
- Midstream infrastructure and ownership shape market access, pricing dynamics and investment considerations in the oil and gas value chain.