Upstream

Understanding Upstream in Oil & Gas

Upstream refers to the exploration and production (E&P) activities that locate, evaluate, drill for, and extract crude oil and natural gas. It is the first stage of the oil and gas value chain, preceding midstream (transportation and storage) and downstream (refining and marketing).

Key takeaways

• Upstream = exploration, drilling, and extraction of hydrocarbons.
• Also called the exploration and production (E&P) sector.
• Midstream transports resources; downstream refines and sells finished products.
• Companies may be specialized (pure-play E&P or services) or integrated across all segments.
• Geologists, geophysicists, rig operators, and seismic/drilling contractors are central to upstream work.

What upstream activities involve

Upstream covers the lifecycle from initial surveys through bringing hydrocarbons to the surface:
* Exploration: land and seismic surveys, geologic and geochemical analysis to identify prospective reservoirs.
Appraisal: test and exploratory wells to estimate reserve size and commercial viability.
Development and production: drilling production wells, running and maintaining rigs, and operating the wells that extract oil and gas.

Techniques commonly used include seismology (creating and interpreting seismic waves), induced-polarization and other geophysical surveys, drilling and assaying core samples, and modern remote sensing and subsurface imaging.

Tip: Oil production is commonly measured in barrels (bbl). One barrel = 42 U.S. gallons. Production is often reported as bbl/day.

Key steps in oil and gas exploration

1. Identify high-potential areas based on regional geology and nearby fields.
2. Conduct geophysical and geochemical surveys (e.g., seismic).
3. Drill exploratory (test) wells to confirm reservoirs.
4. Appraise successful discoveries to estimate recoverable volumes.
5. Drill and complete production wells and begin extraction.

Rig counts and rig utilization rates are widely used indicators of upstream activity and industry health.

Who works in upstream

• Geologists and geophysicists
• Petroleum and reservoir engineers
• Drilling and service rig operators
• Seismic and logging contractors
• Field technicians, production engineers, and support service companies

Transition to midstream and downstream

• Midstream handles gathering, processing, storage, and transportation of crude oil, natural gas, and natural gas liquids (pipelines, tankers, rail, trucks).
• Downstream covers refining crude into products (gasoline, diesel, jet fuel, petrochemicals) and marketing/distribution to end users.

Examples of upstream companies

• Service and technology providers: Schlumberger (SLB), Halliburton.
• National and national-capital companies: China National Offshore Oil Corporation (CNOOC).
• Integrated majors with large upstream operations: ExxonMobil (XOM), Chevron (CVX).

Many large oil firms operate across upstream, midstream, and downstream and are described as integrated oil companies.

FAQs

What does “upstream” mean?
Upstream refers to the initial stages of oil and gas production: exploration, drilling, and extraction.

How does upstream differ from downstream?
Upstream finds and extracts hydrocarbons. Downstream refines, processes, and delivers final petroleum products to consumers.

What are the three sectors of the oil and gas industry?
Upstream (E&P), midstream (transportation and storage), and downstream (refining and marketing).

Is a refinery upstream or downstream?
Downstream.

Bottom line

Upstream operations are the foundation of the oil and gas industry: they discover and produce the raw hydrocarbons that power midstream transport and downstream refining. Advances in geology, geophysics, drilling technology, and data analytics continually reshape upstream efficiency and success.