Midstream is the intermediate phase between the upstream and downstream sectors of the oil and gas industry and refers to the processing, storage, and distribution of crude oil, natural gas, and other energy products. Midstream includes all the infrastructure needed to move these resources, such as pipelines, trucks, railways, and ships.
The oil and gas industry supply chains are varied and complex. They start with in-ground resources and end with finished products for consumers globally. The steps from initial production to the end-use can be divided into three major components: upstream, midstream, and downstream. Upstream refers to the exploration and extraction of natural gas and crude oil; midstream encompasses all of the connection services such as processing, transportation, and storage, and downstream involves the transformation of crude oil into usable products as well as the selling or distribution of products made from crude oil and natural gas. In some cases, sectors of the supply chain may overlap. See graphic below.
The upstream sector is commonly known as the exploration and production (E&P) sector within the petroleum industry. It involves the extraction of crude oil and natural gas by using well-defined technical processes to safely drill wells and install in-ground production equipment that brings the valuable materials to the surface. After reaching the surface, equipment is installed to separate natural gas, crude oil, saltwater, and other impurities for further handling.
The midstream sector covers a range of services that move natural gas, NGLs, and crude oil from areas of production to where these materials are transformed into marketed products. Midstream gathering pipelines move natural gas and crude oil production from thousands of wells to central locations for further handling. Natural gas is delivered to treating plants where unwanted impurities are removed as well as processing plants where valuable NGLs (such as ethane, propane, butanes, etc.) are extracted. The natural gas remaining after treating and processing is often referred to as “pipeline-quality natural gas,” which is transported via intrastate and interstate gas transmission pipelines to the downstream segment of the natural gas sector that fuels homes and businesses as well as electric power generators. Midstream crude oil gathering pipelines operate separately from natural gas gathering pipelines to deliver oil to larger transmission pipelines that transport their products to U.S. refineries and export facilities. NGL transmission pipelines collect natural gas liquids from processing plants around the U.S. and deliver the mixture of products to “fractionation centers.” The mixed materials are then separated into usable feedstocks to the downstream sector, where petrochemical plants transform them into consumer products such as plastics and medicines. Additionally, refiners turn the material into gasoline, diesel, and jet fuel. Midstream companies operate fleets of barges, rail cars, and trucks to deliver crude oil to supply area storage locations as well as to move NGLs and crude oil refined products to consumer markets. Some stages of the midstream process may overlap with the upstream and downstream sectors.
Downstream refers to the finishing stage of the oil and gas supply chain. This is where raw materials get turned into finished products and eventually delivered to consumer markets. These include refining crude oil and the marketing distribution of petroleum products such as lubricants, asphalt, jet fuel, diesel oil, heating oil, kerosene, and gasoline, as well as the production of petrochemicals that are used to produce plastics, medicines, medical equipment, paints, clothing and electronics from NGLs. Natural gas is delivered to homes and businesses for heating, industries like steelmakers and fertilizer production to make food and consumer goods, and electric generators to provide power to illuminate our living spaces and operate the information technology of modern life.
One of the oil and gas industry’s primary raw materials is natural gas, a fossil fuel and one of the world’s cleanest energy sources. The midstream sector has five main components in the movement of natural gas from its production location to its ultimate use: gathering, processing, storing, transporting, and marketing.
The midstream sector is the backbone of our energy economy. It serves a vital role in the oil and gas industry by helping transport and transform raw hydrocarbons produced by a well into usable materials. Without the acts of gathering and processing, the delivery of natural gas to your home or gasoline for your car wouldn’t be possible. Plus, you wouldn’t see familiar products like rubber, plastics, or synthetics on the market without hydrocarbons.
Midstream operators work with landowners, neighbors, regulators, and local governments to plan pipeline routes and build facilities to minimize the impact on the environment and endangered species. No matter the location, midstream assets are subject to numerous regulations and rules that are put in place to ensure operational safety and environmental considerations are a top priority. After the construction is over, regulations are in place to require companies to continuously monitor and measure the ecological effects of midstream operations to meet environmental standards over the asset’s life. These regulations provide strong incentives to apply and use best practices to minimize impacts to the environment. In addition, midstream company employees want to prevent, reduce or mitigate the environmental impact of their operations on their families and communities in which they live.
Midstream facilities and services are needed for many decades to come. The transformation of consumer energy production to include more renewable sources should be done thoughtfully to ensure that the United States does not lose the economical and reliable supplies that currently power our economy and provide jobs for millions of people in manufacturing, services, and technology. Additionally, Midstream will likely provide expertise to recover and transport carbon dioxide associated with carbon capture (CCUS) as well as the transportation of hydrogen in natural gas pipelines. The dedicated employees of U.S. midstream companies are committed to safely operating their facilities to deliver their products to their customers while being mindful of reducing their impact on the environment we all share.
The oil and gas industry is usually divided into three sectors: upstream, downstream, and midstream. The upstream stage of the production process involves identifying and extracting crude oil and natural gas from the ground. Midstream takes the raw material and processes, stores, and transfers it via pipelines, trucks, rail, tankers, and other infrastructure. The downstream stage turns the raw materials into a finished product and distributes it into the marketplace.
Midstream companies prepare the oil and natural gas for various downstream markets, remove water or waste products, and compress, store, and transport the product. These may include companies that specialize in operating pipelines, processing plants, or storage facilities.
Refining is usually classified as a downstream operation within the oil and gas industry, although many integrated oil companies operate both upstream extraction and downstream refining services.
Liquefied natural gas (LNG) is natural gas that has been condensed and liquefied. This is typically done in the downstream segment of the oil and gas process to make transporting and storing natural gas easier.
Interstate pipelines are regulated by the Federal Energy Regulatory Commission, the U.S. Department of Transportation (DOT), as well as the U.S. Environmental Protection Agency (EPA) and are an environmentally friendly way to transport enormous amounts of energy such as natural gas, propane, and gasoline. Gathering pipelines and shorter intrastate pipelines are regulated by state-level counterparts of these agencies as well as the DOT and EPA to ensure they adhere to all regulations for safety and environmental protection.
While the combustion of natural gas produces a variety of greenhouse gases such as carbon dioxide and nitrogen oxides, natural gas is the lightest and least greenhouse gas-intensive hydrocarbon in the energy mix.
Compared to coal, the pollution and greenhouse effect of natural gas is relatively low. Natural gas is cleaner and has fewer greenhouse effects as an energy source than coal during the combustion and use phase.