Economics » Natural Resources and the Economy » Upstream/Downstream of the Oil Sector

Downstream Oil and Gas Production

The closer an oil and gas company is to supplying consumers with petroleum products, the further downstream it is said to be in the industry. Downstream operations are oil and gas processes that occur after the production phase to the point of sale.

This sector of the oil and gas industry – the final step in the production process – is represented by refiners of petroleum crude oil and natural gas processors, who bring usable products to end users and consumers. They also engage in the marketing and distribution of crude oil and natural gas products. Simply put, the downstream oil and gas market is anything that has to do with the post-production activities of crude oil and natural gas.

Companies engaged in the downstream process include oil refineries, petroleum product distributors, petrochemical plants, natural gas distributors, and retail outlets. Many major downstream companies are also well diversified and engage in all levels of the production process. Examples of downstream companies include leading U.S. refiners Marathon Petroleum (MPC) and Phillips 66 (PSX). Phillips 66 was initially part of parent company ConocoPhillips (COP) until the larger oil company opted to spin off the downstream business in 2012.

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