Midstream 101

What does midstream mean?

The oil and gas industry consists of three major segments: upstream, midstream and downstream.

  • The MIDSTREAM segment connects upstream and downstream by gathering, transporting, storing and distributing 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 UPSTREAM segment searches for oil and gas resources, drills and operates wells, and brings hydrocarbons to the surface.
  • The DOWNSTREAM segment refines, processes and purifies crude oil and natural gas and distributes energy to consumers and end users through products such as gasoline, kerosene, jet fuel, heating oil, lubricants, liquefied natural gas and hundreds of petrochemicals.

The midstream sector is a vital part of the North American oil and gas industry. After crude oil and natural gas are extracted from thousands of wells operated by the upstream sector, midstream companies purify and transport these raw materials to make them into consumer products like gasoline and plastics. Midstream “connects” the upstream and downstream energy segments efficiently and safely every day.

Why are pipelines the safest way to transport oil and gas? 

According to the US Department of Transportation, pipelines are the safest way to transport crude oil, refined products, and natural gas over the long distances necessary to deliver energy to everyone who needs it. Pipeline capacity is far greater and more efficient than other modes of transportation. Midstream companies invest in technological advancements that significantly increase pipeline safety by monitoring operating conditions and product flows. Pipeline companies work with regulators to implement engineering standards to ensure their systems protect the communities and the environment.

The Production Process: Upstream, Midstream, Downstream

Oil and gas industry supply chains are varied and complex. They start with in-ground resources and end with finished products enjoyed by consumers globally. The steps from initial production to 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 connection services such as processing, transportation, and storage; and downstream involves the transformation of crude oil into usable products as well as selling and distributing products made from crude oil and natural gas. In some cases, sectors of the supply chain overlap. See graphic below.

Midstream Process

Upstream: The Discovery and Production Process

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.

Significant activities in the upstream sector include:

  • Geological and geophysical (G&G) surveying
  • Searching for underground or offshore crude oil and natural gas reserves
  • Obtaining leases and permissions from landowners to drill
  • Drilling and completing wells
  • Short-term storage of the oil in producing areas
  • Permanently sealing wells after the mineral reserves are depleted
  • Separating oil, saltwater, and gas at wellheads

Midstream: Gathering, Processing, Transportation, and Storage

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 treatment plants where 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.

Significant activities in the midstream sector include:

  • Processing natural gas to recover valuable products such as ethane, propane, and butane
  • Treating to remove impurities and produce pipeline-quality natural gas
  • Storing of crude oil, NGLs, and pipeline-quality natural gas
  • Transportation (pipeline, rail, truck, barge)
  • Marketing of pipeline quality natural gas, NGLs, and crude oil

Downstream: Finishing the Product

Downstream refers to the finishing stage of the oil and gas supply chain. This is where raw materials get turned into finished products and delivered to consumer markets. This includes 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 production of petrochemicals 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 use natural gas 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.

Significant activities in the downstream sector include:

  • Refining
  • Transporting to retail facilities
  • Marketing the refined products
  • Generating reliable power
  • Supporting renewable generation

Steps in Midstream Natural Gas Operation Value Chain

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.

1. Gathering

Natural gas consists of hydrocarbons like methane, propane, butane, pentane, plus many more...

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2. Processing

Raw natural gas brought from the earth to the wellhead is different from the natural gas consumers...

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3. Storing

Natural gas received by natural gas transportation pipelines after the gathering and processing stages...

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4. Transporting

Natural gas may have to travel a great distance to reach its destination, and pipelines provide the safest method of transportation...

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5. Marketing

Companies operating in the midstream industry are often responsible for finding a home for the natural gas and natural gas liquids (NGLs) that they have gathered and processed...

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The Importance of Midstream

The midstream sector is a vital part of the North American oil and gas industry. After crude oil and natural gas are extracted from thousands of wells operated by the upstream sector, midstream companies purify and transport these raw materials to make them into consumer products like gasoline and plastics. Midstream “connects” the upstream and downstream energy segments efficiently and safely every day.

Midstream’s Impact on the Environment

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 ensure operational safety and environmental considerations are a top priority. When construction is over, regulations are in place to require companies 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.

The Future of Midstream

Midstream facilities and services will be an essential part of our energy future. Changes in energy production to include more renewable sources should be done thoughtfully to ensure that the United States does not lose the safe, affordable 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 and other liquid fuels in natural gas pipelines. The dedicated employees of U.S. midstream companies are committed to safely operating their facilities to deliver products to customers while reducing the impact on the environment we all share.

Midstream Q&A

What is upstream, midstream, and downstream in oil and gas?

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.

What is a midstream oil and gas company?

Midstream companies prepare the oil and natural gas for 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.

Is oil refining midstream or downstream?

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.

What are midstream services?

Midstream companies build and operate the infrastructure and equipment needed to purify, transport, store and trade crude oil and natural gas from the well (upstream) to homes and businesses (downstream).

What are midstream facilities?

Midstream facilities include gathering and transmission pipelines, compressor stations, equipment, storage, and other facilities necessary to safely transport crude oil, natural gas and natural gas liquids to businesses and homes.

What is the most environmentally friendly fossil fuel source?

Natural gas is the most environmentally friendly fossil fuel source.  Using natural gas for energy helped the US energy sector to slash greenhouse gas emissions while increasing energy production.

Which fuels have the lowest carbon footprint?

Hydrogen, natural gas, biodiesel,  propane, and LPG (liquefied petroleum gas) are commonly used fuels with the lowest carbon footprints. By emitting less carbon per unit of energy, these fuels help combat climate change while providing energy affordability and reliability.

Is LNG midstream or downstream?

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.

Are pipelines safe for the environment?

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.

Do pipelines destroy ecosystems?

Advancements in pipeline construction and maintenance reduce the chance and size of any unplanned release. Midstream companies adhere to environmental protection standards that enhance pipeline safety by selecting routes that minimize crossing wetlands and water sources. Pipeline companies protect ecosystems by managing natural resources, monitoring endangered species, and restoring wildlife habitats.

Does natural gas cause pollution?

While the combustion of natural gas produces  greenhouse gases such as carbon dioxide and nitrogen oxides, natural gas is the lightest and least greenhouse gas-intensive hydrocarbon in the energy mix.

Which is better natural gas or coal?

Compared to coal, the pollution and greenhouse effect of natural gas is low. Natural gas is cleaner and has fewer greenhouse effects as an energy source than coal during the combustion and use phase.