What is upstream in the oil industry?

Upstream in the oil and gas industry refers to the exploration and production (E&P) segment — all activities involved in finding oil and gas reservoirs and bringing crude oil or natural gas to the surface. This includes seismic surveys, drilling exploratory wells, developing discovered fields (production wells, platforms, subsea equipment), and operating producing fields. Key upstream companies include Saudi Aramco, ExxonMobil, Shell, BP, Chevron, and hundreds of independent E&P companies.

What is downstream in the oil industry?

Downstream refers to the refining, distribution, and retail segment — everything after crude oil leaves the production facility. It includes crude oil refining (converting crude into petrol, diesel, jet fuel, and other products), wholesale product distribution, and retail fuel sales at filling stations. The downstream segment is what connects the crude oil price to the pump price consumers pay.

What is midstream in the oil and gas industry?

Midstream is the transportation and storage segment that sits between upstream production and downstream refining. It includes crude oil pipelines and tankers (moving crude from production sites to refineries), oil and gas storage terminals, natural gas gathering and processing, and LNG liquefaction and regasification terminals. Midstream infrastructure is capital-intensive, long-lived, and often operates on fee-for-service tariff models rather than commodity price exposure.

Are oil companies integrated or specialized?

Major oil companies (IOCs) like ExxonMobil, Shell, BP, TotalEnergies, and Chevron are integrated — they operate across all three segments (upstream, midstream, downstream) and sometimes petrochemicals. National oil companies (NOCs) like Saudi Aramco, ADNOC, and CNPC are also highly integrated. Many independent companies specialize in a single segment: pure-play E&P companies (upstream only), pipeline master limited partnerships (midstream only), or independent refiners and fuel retailers (downstream only).

Upstream, Midstream & Downstream

The three segments of the oil and gas industry — from finding crude in the ground to delivering refined fuel to the forecourt.

The three-segment model

The oil and gas industry divides its value chain into three broad segments, each with distinct activities, economics, and risk profiles:

Upstream — Exploration and production (E&P): finding and extracting crude oil and natural gas
Midstream — Transportation, storage, and processing: moving crude from production to refineries and gas to consumers
Downstream — Refining, distribution, and retail: converting crude into products and selling them to end users

The pump price you pay at a forecourt is the cumulative output of all three segments: upstream extraction costs, midstream logistics, downstream refining and distribution, plus taxes. For a detailed breakdown of how these costs sum to the pump price, see what makes up the price at the pump. For live pump prices globally, use the fuel price explorer.

Upstream: exploration and production (E&P)

The upstream segment encompasses every activity from the first geological survey to the point crude oil or natural gas leaves the production facility:

Exploration: Seismic surveys, geological mapping, exploratory drilling to find new hydrocarbon accumulations
Appraisal: Drilling appraisal wells to determine reservoir size and producibility
Development: Building production infrastructure — wellheads, production platforms, subsea equipment, gathering systems
Production: Operating producing wells; enhanced oil recovery (EOR) to increase ultimate recovery
Decommissioning: Safely abandoning wells and removing infrastructure at end of field life

Upstream economics are driven by the lifting cost (cost to produce a barrel once in production) and the wellhead price received for the crude. The difference — the upstream margin — varies enormously by geology and geography: Saudi Arabian onshore oil sands cost under $5/bbl to lift; Alberta oil sands cost $20–35/bbl; deepwater Brazilian pre-salt costs $15–25/bbl.

Upstream category	Typical lifting cost ($/bbl)	Examples
Middle East onshore conventional	$2–8	Saudi Arabia, Kuwait, Iraq
US shale (Permian, tight oil)	$25–45	Pioneer, ConocoPhillips, Devon
North Sea offshore	$20–40	Equinor, Harbour Energy, Shell
Canadian oil sands (SAGD)	$20–35	Cenovus, Suncor, CNRL
Deepwater offshore	$15–30	TotalEnergies, Petrobras, BP

Midstream: transportation and storage

The midstream segment moves crude oil from production fields to refineries, and moves refined products and natural gas to distribution points. Key activities:

Crude oil pipelines: e.g., Trans Mountain Pipeline (Canada), Dakota Access Pipeline (US), Druzhba pipeline (Russia to Europe)
Crude oil tankers (VLCC, Suezmax, Aframax): Moving crude between continents; tanker rates tracked as the Baltic Dirty Tanker Index
Crude oil storage: Tank farms at pipeline terminals, refineries, and strategic petroleum reserves
Natural gas gathering and processing: Collecting associated gas from oil wells, removing liquids, processing to pipeline specification
LNG liquefaction and regasification: Converting natural gas to liquid for ocean transport (liquefaction) and back to gas at destination (regasification)
Product pipelines: Moving refined products from refineries to distribution terminals

Midstream infrastructure is characterised by high fixed costs, long economic lives (40–50+ years for pipelines), and regulatory or contractual protections that make earnings more stable than upstream or downstream. US midstream companies are often structured as Master Limited Partnerships (MLPs) for tax efficiency.

Downstream: refining, distribution, and retail

The downstream segment converts crude oil into consumer products and delivers them to end users:

Refining: The central step — crude is processed into petrol, diesel, jet fuel, LPG, heating oil, and petrochemical feedstocks. See our glossary entry on how refineries work.
Product blending: Intermediate refinery streams are blended to hit finished product specifications for octane (petrol) and cetane (diesel)
Product terminals: Storage and distribution hubs where product is loaded onto tanker trucks for delivery to forecourts and industrial users
Retail forecourts: The consumer-facing end of the value chain — filling stations and commercial fuelling depots
Petrochemicals: Many integrated downstream operators also produce ethylene, propylene, and other petrochemical building blocks from refinery naphtha streams

The downstream refinery margin is measured by the crack spread — the difference between the value of refined products and the cost of crude oil. The refinery gate price is the first wholesale price in the downstream supply chain.

Integrated majors vs segment specialists

Company type	Segments	Examples
Integrated major (IOC)	Upstream + Midstream + Downstream + Petrochemicals	Shell, ExxonMobil, TotalEnergies, BP, Chevron
National oil company (NOC)	Upstream (primary) + increasingly Downstream internationally	Saudi Aramco, ADNOC, CNPC, Petrobras, NIOC
Independent E&P	Upstream only	Pioneer, Hess, Harbour Energy, Tullow Oil
Midstream specialist	Midstream only	Enterprise Products Partners (US MLP), Enbridge, TC Energy
Independent refiner	Downstream (refining) only	Valero, Phillips 66, Marathon Petroleum
Fuel retailer	Downstream (retail) only	EG Group, Applegreen, independent forecourt operators

The degree of vertical integration affects how a company's profitability responds to crude price movements. An integrated major is partly insulated: when crude prices fall, upstream earnings fall but downstream refining margins may widen; when crude rises, upstream earnings recover but downstream margins may compress. Pure-play companies have more direct exposure to their specific segment's economics.

How value flows from upstream to the pump

The price at a retail fuel station is the cumulative result of all three segments:

Upstream: Crude produced at lifting cost; sold at the spot price or via term contracts priced against Brent crude
Midstream: Crude transported by pipeline or tanker to the refinery; transport cost added
Downstream (refining): Crude processed into petrol/diesel; refinery gate price = crude + crack spread + refinery operating cost
Downstream (distribution): Product moved by pipeline or road tanker to the terminal; logistics cost added
Downstream (retail): Fuel duty and VAT added; retail margin added; pump price set

For current pump prices globally, use the fuel price explorer. For how quickly crude price changes reach the pump, see oil price to pump price lag.

Frequently asked questions

What is upstream in the oil industry? Upstream refers to the exploration and production (E&P) segment — finding oil and gas reservoirs and producing crude oil or natural gas. It includes seismic surveys, exploratory and production drilling, field development, and operating producing wells. Key players include Saudi Aramco, ExxonMobil, Shell, BP, and independent E&P companies.: Upstream refers to the exploration and production (E&P) segment — finding oil and gas reservoirs and producing crude oil or natural gas. It includes seismic surveys, exploratory and production drilling, field development, and operating producing wells. Key players include Saudi Aramco, ExxonMobil, Shell, BP, and independent E&P companies.
What is downstream in the oil industry? Downstream is the refining, distribution, and retail segment. It covers crude oil refining (converting crude into petrol, diesel, jet fuel, etc.), wholesale product distribution, and fuel sales at filling stations. The downstream segment is what links the crude oil price to the pump price consumers pay.: Downstream is the refining, distribution, and retail segment. It covers crude oil refining (converting crude into petrol, diesel, jet fuel, etc.), wholesale product distribution, and fuel sales at filling stations. The downstream segment is what links the crude oil price to the pump price consumers pay.
What is midstream in the oil and gas industry? Midstream is the transportation and storage segment between upstream production and downstream refining. It includes crude oil pipelines and tankers, oil storage terminals, natural gas gathering and processing, and LNG liquefaction/regasification. Midstream infrastructure has high fixed costs and long economic lives, with more stable fee-based earnings than upstream or downstream.: Midstream is the transportation and storage segment between upstream production and downstream refining. It includes crude oil pipelines and tankers, oil storage terminals, natural gas gathering and processing, and LNG liquefaction/regasification. Midstream infrastructure has high fixed costs and long economic lives, with more stable fee-based earnings than upstream or downstream.
Are oil companies integrated or specialized? Both. Integrated majors (ExxonMobil, Shell, BP, TotalEnergies, Chevron) and large NOCs (Saudi Aramco, ADNOC) operate across all three segments. Many companies specialise: pure-play E&P companies (upstream only), pipeline MLPs (midstream only), and independent refiners like Valero or Phillips 66 (downstream refining only).: Both. Integrated majors (ExxonMobil, Shell, BP, TotalEnergies, Chevron) and large NOCs (Saudi Aramco, ADNOC) operate across all three segments. Many companies specialise: pure-play E&P companies (upstream only), pipeline MLPs (midstream only), and independent refiners like Valero or Phillips 66 (downstream refining only).