The oil and gas industry is one of the most complex industries in the world. It makes sense, therefore, that the oil and gas supply chain is equally complex.
With so many different players in the industry, oil and gas companies are constantly working to innovate the supply chain. Companies want each piece to be more efficient for them as well as better for their customers at every stage of the process.
Huge amounts of data are being shared between parties, yet many of these data-sharing processes are done manually. Partner Insights streamlines the collection and distribution of data to ensure quality and consistency.
This article will break down the downstream oil and gas supply chain and outline each party’s role. First, let’s look at the entire oil and gas supply chain as a whole and then home in on the downstream activities.
What is the oil and gas supply chain?
The oil and gas supply chain can be divided into upstream, midstream, and downstream.
Upstream operations involve oil and gas exploration, oil companies, and oil field services firms that provide specialized equipment to oil producers. These activities are what people generally think of when they think of oil and gas. However, the oil industry is much more than that.
The midstream supply chain is exactly what it sounds like. It connects the upstream and downstream supply chains and comprises crude oil’s storage, transportation, and logistics.
Downstream activities occur after the crude oil has been drilled and lifted. Broadly speaking, refining oil, producing petrochemicals, and marketing and distributing refined products and natural gas are the three primary operations in the downstream sector of the petroleum industry.
Some companies include all of these activities and are referred to as integrated oil and gas companies. Others focus on one specific area, such as the refinery process.
Let’s break down those areas even further and outline their role in the larger supply chain.
Crude oil is a combination of thousands of hydrocarbons, each with its own size, weight, and boiling temperature. In oil refining, different types of crude oil are converted to a wide range of petroleum products.
Refineries process the oil and use heat and pressure to separate the various components:
- First, crude oil is divided into different segments, depending on its boiling point.
- Then, large molecules are converted or cracked into lighter ones using heat and pressure.
- Finally, different hydrocarbon streams are combined to create a finished product.
The most widely known and used petroleum product is gasoline. However, there are many more, including aviation fuel, diesel oil, and heating oil. There are also lesser-known products, such as asphalt, waxes, and lubricating oil.
The process of refining oil is a complex one that requires an army of workers on the ground and in behind-the-scenes operations to ensure quality control for each product produced.
Marketing and Retail
Once the oil has been refined, it must be marketed and sold. Thus, marketing in the oil and gas supply chain refers to selling and distributing oil and gas products.
Marketing in the oil and gas industry is a business unto itself, but it also works closely with other areas such as refining to ensure oil quality for each brand. Oil marketers play an integral part in this process by blending all types of oil to create fuel oil or specialty oil products required for specific customers’ needs.
Oil marketers purchase refined petroleum from refineries or oil pipelines along with crude oil inputs from producers. These products are sold at terminals or oil storage facilities, and wholesale and rack oil prices are listed on oil exchanges.
Oil marketing involves oil trading in various forms, including spot contracts, forwards, and swaps. Terminals are responsible for setting pricing and coordinating the carriers for transporting oil products. As a result, terminals are generally very busy, and oil products are constantly being shipped in and out for distribution companies.
Oil marketing is a complicated but necessary process that ensures oil quality standards are maintained while keeping the supply chain running smoothly at each production stage.
Retailers purchase fuel products in bulk quantities at wholesale prices from oil marketers. From there, carriers will transport oil and gas products from the terminal to the retailers. The oil is then transported through pipelines, barges, trucks, railcars, and/or tankers before being delivered to the end-user at their retail location.
The final step in the supply chain is the retail location. Finally, the product is purchased by a consumer or commercial business.
Managing the Oil and Gas Supply Chain
With so many players in the supply chain, communication is the key to success. However, oil supply chains are very complex, subject to constant change, and part of a volatile market, making communication difficult.
Any operational intelligence lies in securing reliable data, especially in the downstream supply chain. Unfortunately, many of the processes in sharing and collecting data are done manually. The result is an increased amount of human error that can cause delays. It can have long-term effects that cost you time and money and strain business relationships.
With profit margins already thin in the downstream supply chain, this is simply not a mistake that you can afford. The proper handling of data is key to having the business intelligence you need. Without data, you cannot make informed decisions that will affect your bottom line or help drive your company forward in the market.
In today’s digital age, it’s easier than ever to collect oil supply chain data automatically. DTN Partner Insights solution is a digital platform that helps you organize and distribute data more efficiently. It safely and securely integrates data into your current business processes while maintaining quality and consistency. In addition, our clients find it flexible and easy to use.
Not only does it drastically reduce turnaround times, but it also enables fast, secure inter-enterprise data sharing and coordination.
Digitize your data and partnerships with Partner Insights today.