Important Terms from A to Z
Downstream refers to all activities and operations in the oil industry that take place after oil extraction (before oil extraction = upstream). In some cases, there is an additional distinction into "midstream" activities in the downstream sector. Thus the downstream sector includes transport, processing and sales, i.e. all services from the transport and storage of petroleum products to their sale in the consumer markets.
Most downstream activities involve supply chain management, and are traditionally part of the core competencies of most oil companies. Supply chain management ranges from establishing and managing integrated logistic chains, to the entire value and supply chain process and all refining/processing stages, to the end-consumer. Due to the enormous worldwide consumption of approximately 3.5 billion tons of oil annually, supply chain management is particularly important within the downstream sector. In order to cope with such quantities, the link between transportation and storage activities requires advanced coordination, precision and efficiency.
The segmentation of the oil industry value chain into crude oil production (upstream) and refining, and transportation and delivery of petroleum products to the end-consumer (downstream) is historically attributed to the separation of oil exploration by companies in producing countries, and sales by companies based in consuming countries. It was prompted by consuming countries to make producing countries dependent on them for their well-functioning and comprehensive transportation and distribution networks.
Status: December 2015
All information subject to change. Errors and omissions excepted.