What is Oil and Gas Sector?

What is Oil & Gas

Oil and gas Sector is the biggest sector in the world in terms of dollar value, it is a global powerhouse using hundreds of thousands of workers worldwide and generating hundreds of billions of dollars globally each year.

Key areas of Oil and Gas Industry

The Oil & Gas industry in the energy sector has three key areas: Upstream, midstream and downstream.

Upstream : “Exploration” Involved in the actual drilling and bringing oil and natural gas resources to the surface

Midstream : Anything required to transport and store crude oil and natural gas before they are refined and processed into fuels.

Downstream: Refine crude oil and raw natural gas into consumable fuels, such as gasoline, diesel fuel, and jet fuel. 

Upstream downstream and mid stream

Role of OPEC in Oil & Gas Industry

The Organization of Petroleum Exporting Countries (OPEC) is one of the intergovernmental organization between energy suppliers and stabilize the markets & accounts for more than 40% of the oil production all over the world.

Factors to determine Crude Price in Oil & Gas Industry

There are few factors which determines the crude price. We need to understand the following facts

  • Light crude is easier to refine and produces higher quantities of high-quality gasoline and diesel fuel; hence important factor to determine cost.
  • The heavier and denser the oil is, the harder it is to transport. Hence, additional cost will be involved.
  • Crude classified as extra heavy can also be referred to as bitumen. It is so thick that it must be diluted to transport which again adds cost in overall price.

Huge Capital Expenditures in Oil and gas Industry

Oil & Gas businesses incur huge capital expenditures the major reasons behind these expenditures are :

They have to own large amounts of assets which include

  • Land for oil reserves
  • Plants and equipment for crude oil and raw natural gas processing
  • Infrastructure or transportation.
  • Substantial spending on research and development (R&D) to update technology.
  • Adapt to the changing environmental policies.

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