How the Oil and Gas Industry Works

We’re all aware of how important oil and natural gas are as fuel sources, their importance in the industry can be observed from the impact they create on the global economy. These two natural resources are the backbones of the energy sector. Acquiring them is a complex process costing a ton of capital, along with the use of state-of-the-art technology to refine them into usable fuel components. Natural gas is as we know is linked to oil at many levels, due to the industry upstream, however, a lot of countries still view natural gas as a nuisance. 

In the United States, natural gas is flared in huge quantities for economy and safety. On the contrary, shale gas upstream in the US is also common due to its lower greenhouse gas emissions, all in all, the natural gas industry is now a major provider in the world’s energy sector.

Oil, on the other hand, is known to be a reliable fuel source for more than 2000 years, even though it is of a non-renewable nature, a huge portion of the economy depends on oil, especially in the countries that are its major producers like the United States, Saudi Arabia, Russia, Canada, and China.

The oil and gas industry uses complex vocabulary and techniques that surpass a layman, we’ll try to get an insight into the procedures to understand how the fuels running our systems are produced. If you want to pursue your career in the oil and gas industry and are willing to find the best job, then you should visit It is a specialised employment agency which provides work opportunities in the oil and gas sector in different regions of Canada.


From where do we obtain oil and natural gas? Let’s go back in time when ancient living bodies got crushed under the sea-beds over a long time, the bodies of water formed sedimentary rocks when layers of silt (fine sand) accumulated on the ocean floor, now the rotting carcasses of both plants and animals turn into fossils, later over a period of time under certain pressures and temperatures beneath the earth’s crust, these fossils turn into either oil reserves or gas reserves ready for us to extract and use as fuels for our homes, vehicles, and other utilities.

Now, these dead plants and animal remains are compressed into something called crude oil or gas. They are found under cap rocks and deep ocean floors, a process of drilling is now needed to reach the reserves and bring the hydrocarbons (a chemical compound) to the surface. 

To visualize it a little better, think of it as digging a well but instead of stopping at water pockets, we dig further down until we reach the fuel reservoirs.

The Three Primary Segments 

The oil and gas industry is broken down into three different segments:

  • Upstream
  • Midstream
  • Downstream


Upstream refers to the business revolving around exploration and production of oil and natural gas, it involves a long process of global scouring for the raw material reserves which are then drilled and extracted. We have to take into account factors like large risks, high capital, long duration, and high-tech tools (complex and expensive machinery) when looking at an E&P company.


Midstream companies refer to the transportation industry; they are usually concerned with the transportation of extracted raw materials to refineries, where the oil and natural gas are then processed (refined), more specifically a midstream business involves factors such as shipping, raw material storing, pipelining, trucking and management in between these processes. The capital risks are minimal here as compared to upstream businesses.


Coming to the downstream end, they refer to the processes involving refining of crude oil into various products, such as gasoline, natural gas liquids, diesel, kerosene, etc. after these products reach their end state, they are transported to us, the clients, which is all a part of a downstream company.

Oil and Gas Industry Outlook

The oil and gas industry has an enormous impact on the global economy as well as infrastructure, nowadays petrol/gasoline has become a commodity, it’s now a part of people’s daily routine, in fact, it’s hard to imagine a world without these natural resources. 

Regardless of the crumbling global economy, the oil and gas industry still holds a major influence over international economics and politics, especially when it comes to employment. The US alone is providing at least 10 million jobs in this industry.

Oil and gas or any natural resource will inevitably come to an end as these natural resources are non-renewable, the process of exploration and extraction is continuously going on and efforts are being made in different parts of the world in strengthening exploration and production activities, China, Brazil, and Russia, for instance, have taken a keen interest in making E&P companies both on-shore and off-shore.

We currently do have some man-made resources that may one day replace natural resources or non-renewable energy as they are expected to become way more cost-effective in the long run, according to IRENA, new renewable energy will become cheaper due to the alternatives like solar power, wind power, and electricity. About 80% reduction is projected in the oil and gas industry alone.

The industry is being scrutinized more than ever before, due to the rise of pro-environmental laws and political pressure. An increase in the upstream has a severe impact on the midstream companies as the focus is shifted, furthermore, crude oil prices have now been leveled-out at about 50$ per barrel.

The United Kingdom is working its way to the top as they’re commencing exploration and discoveries on the horizon, the future of the UK upstream seems bright as there are 16 planned greenfield projects, and about 29 announced projects expected to enter production between 2019 and 2025, these projects could massively change UK’s upstream prospect.

Update the words to this: Globally speaking, almost about 30 billion barrels of oil are consumed each year, varying from region to region, with significant contributions from regions like the Gulf of Mexico, which is a vital area for gulf of mexico oil and gas production. Most of this oil is consumed by wealthy countries, whether it’s used as a ‘daily fuel’ or an ‘energy source’. Oil is consumed at rates of 32 percent in Europe and Asia, 40 percent in North America, 41 percent in Africa, 44 percent in the South, and 53 percent in the Middle East yearly.

Christopher Stern

Christopher Stern is a Washington-based reporter. Chris spent many years covering tech policy as a business reporter for renowned publications. He has extensive experience covering Congress, the Federal Communications Commission, and the Federal Trade Commissions. He is a graduate of Middlebury College. Email:[email protected]

Related Articles

Back to top button