Where Midstream Sits in the Value Chain

The link between the field and the customer

The oil and gas industry is often split into three parts. Upstream finds and produces oil and gas. Downstream refines, sells and distributes finished products. Midstream is everything in between: gathering, processing for transport, storing and moving hydrocarbons to the next owner.

Midstream assets look simple. A pipe, a tank or a ship has few moving parts. But they hold very large inventories of flammable fluid, they run for decades, and they cross land and water that other people use. A failure is rarely small. That is why midstream work demands careful design, steady operation and strict integrity management.

Choosing the transport mode

Each mode has a different balance of capital cost, running cost and flexibility.

• Pipeline — very high capital cost, very low cost per barrel once built, and almost no flexibility. It suits large, steady volumes over a fixed route for many years.
• Ship — moderate cost and high flexibility. One cargo can go to any port that can receive it. It suits long distances across water.
• Rail — useful where pipeline capacity is missing or a route is uncertain. Higher cost per barrel, but quick to start.
• Road tanker — the most flexible and the most expensive per barrel. It suits the last part of the journey and small volumes.

One system, many owners

A barrel often changes hands several times between the well and the customer. At every handover point, the two parties measure the quantity and quality. This is called custody transfer. Errors at these points cost real money, so midstream work is also a measurement discipline, not only an engineering one.

A common mistake is to think of each asset alone. In practice, a tank farm, its pipeline and the jetty behind it work as one system. A problem in one — a slow ship, a pump trip, a full tank — quickly becomes a problem in the others.