Square One - To Understand the Hydrocarbon Value Chain, Start With The Basics

The energy industry — everything from oil and gas production and transportation to oil refining, gas processing and NGL fractionation — has a myriad of variables influenced by dozens of factors. It’s a value chain so vast you’d think it would be impossible to explain in simple terms. But behind it all is a well-oiled machine for developing the resources that literally fuel our modern economy. And, by understanding what happens at each link in the value chain, you can ultimately gain a clearer picture of what’s happening in energy markets. In today’s RBN blog, we kick off a series aimed at examining and explaining the oil and gas value chain, starting with the upstream world of exploration and production — what happens in production areas, the types of companies that operate in that segment, and the critical role of oil and gas reserves.

RBN’s blogs are at their best when they convey an understanding of energy markets that is detailed and easy to follow — but not dumbed down. Explanatory blogs have been a staple since our early days, dating back to 2012’s Complex Refining 101. These blogs have been particularly important when we’ve written about a new technology or a project, or when we’ve expounded on new topics or developing trends in the market, such as clean hydrogen, as we did with Help! in 2020; carbon capture and sequestration, as we did with The Air That I Breathe in 2021; and the emerging conflicts between the energy transition and today’s energy realities, as we did in Monkey Wrench this spring. Today, we begin a new series of blogs set to explore the entire value chain. This first series will focus on the upstream sector, and future blogs will discuss the midstream and downstream segments.

In the upstream segment (black lines in Figure 1 below) of the energy industry, E&Ps focus on finding and extracting hydrocarbons. This includes well-site exploration and development, drilling and completion, as well as gathering and field separation of the recovered crude oil and natural gas. Many of the largest upstream players are independent companies that focus specifically on that segment — names like Occidental Petroleum and Pioneer Natural Resources. (We should also note that the upstream, midstream and downstream segments can have some overlap, so the line colors in Figure 1 are basic descriptions.)

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