Oil and Gas Industry 101: Understanding the Basics

Oil and gas play vital roles in our everyday lives. They power some of the most important types of machinery and equipment we use daily. Many electric power plants burn coal, natural gas, and crude oil to produce electricity for our energy needs. Most of our modes of transport run on oil and gas.

Having said that, you probably think it is a lucrative industry to invest in and will bring you a fortune in returns. Before heading to the COPAS website or any other reputable oil and gas accounting firms for consultation, it is best to understand the nature of the industry first.

What is the Oil and Gas Industry?

Considered as the largest industry in the world as far as dollar value is concerned, the oil and gas industry is a global giant that employs hundreds of thousands of workers worldwide and generates hundreds of billions of dollars annually. In areas where major national oil companies, or NOCs, are housed, this industry contributes significantly towards a national gross domestic product.

How Does It Work?

This industry is divided into three main sectors, namely, the upstream sector, the midstream sector, and the downstream sector. Each of these sectors has its roles and characteristics that are crucial to the industry in general.

Upstream Sector

oil and gas upstream sector

The upstream sector is the E&P (exploration and production) sector is responsible for finding underground and underwater crude oil and natural gas deposits and producing them, including drilling and recovering these resources.

Midstream Sector

The midstream sector is where the transportation, storage, processing, and marketing of oil and gas occur. It connects the upstream and downstream participants and companies.

Downstream Sector

The downstream sector is the final stage in the oil and gas supply chain. This is where the refining of oil and gas takes place followed by its distribution. This sector reaches the consumers with byproducts such as gasoline, jet fuel, kerosene, lubricants, and liquified petroleum gas (LPG) among others.

Why Is It Important?

Oil and gas have become the most important source of energy known to the entire world. It supplies energy to power industries, heat homes, and provide fuel for vehicles and planes to transport people and goods all over the world.

This industry has a direct and indirect impact on the domestic economy with both oil and gas affecting directly the health of the economy as a whole. To protect the economy, this industry has to thrive.

The world’s dependence on the oil and gas industry is increasing. Global economies and infrastructure rely heavily on this industry. It is vital to the maintenance of industrial civilization which makes it a critical concern for a lot of nations.

The country’s future is extremely dependent on the health and strength of the oil and gas industry. Fortunately for us, this industry has been expanding for quite some time. Additional investments in pipelines and drillings will poise the U.S. to be one of the major exporters of crude oil and natural gas.

Though there have been several renewable and sustainable energy alternatives, none have contributed a significant amount to meet the world’s energy needs. Oil and gas are necessary resources. Without this industry, many countries will grind to a halt.