DOWNSTREAM PROCESS

by
RAGAVENDAR.A & SABARESAN.M
 CRUDE OIL PRODUCT
EXPLORATION & REFINING DISTRIBUTION &
PRODUCTION SALES

DOWNSTREAM
 The petroleum industry can be divided into three broad segments:
 Crude oil exploration and production
 Refining &
 Product distribution and sales.

 Crude oil exploration and production is commonly referred to as the

“Upstream”. Refining and product sales are generally referred to as the
“Downstream”.

 As the industry is globalising new major companies are being formed,

particularly in Russia, China, India and Brazil.

 These companies are exhibiting global ambition both in the upstream and
downstream.
 The petroleum industry can be divided into three broad segments:
crude oil exploration and production, refining and product
distribution and sales.

 The downstream oil sector is a term commonly used to refer to the

selling and distribution of natural gas and products derived from
crude oil.

 The downstream sector includes petroleum product distribution,

retail outlets and natural gas distribution companies.
CHARACTERISTICS UPSTREAM REFINING DISTRIBUTION &
SALES
SOURCE RESOURCE MANUFACTURING MARKETING
EXTRACTION
• Revenue depends • Revenue depends • Revenue depends on
KEY DRIVERS on absolute price on margin margin
• Access to resources • Location • Location
• Technical skills • Configuration • Marketing skills
• Technical skills • Economy of scale
FINANCIAL Highly capital Highly capital Low capital relative
RESOURCE intensive intensive to other segments

Often highly taxed Subject to corporate Subject to corporate

GOVERNMENT taxes taxes. Products
TAXATION highly taxed in
Europe
 Crude Oil Distillation

LPG LPG
Light St. Run
Gasoline
Naphtha Jet Fuel / Kero

Distillates Diesel /
Further
Crude Oil Refining Heating Oils

Gas Oils
Bunker/Fuel Oils

Residual
(0 - 40%) Misc. Products
• Coke (carbon)
• Sulfur
REFINERY
RETAIL RETAIL
(OWN BRAND)

WHOLESALE
RETAIL
(THIRD PARTY)

COMMERCIAL
FUELS
INDEPENDENT
WHOLESALRES/ AVIATION FUELS
RETAILERS
INDUSTRIAL
FUELS

MARINE BUNKER
FUELS

OWN
WHOLESALRES
CARGO SALES
BULK
LARGE
CONSUMERS
 There are three main channels of sale for products from a refinery to
the consumer : Retail, Wholesale and Bulk.

 The wholesale (or distributor) sector supplies to customers in small

loads either directly from a refinery by truck or from a distribution
terminal that is fed from a refinery or imports.

 Bulk sales are large volume sales that are generally made directly by
the refiner or by a large trading company. Typical customers would be
a petrochemicals plant or nearby power station.
 TAMOIL

 PREEM

 NESTEOIL

 ERG

 Q8
 Refined products are traded in reference to prices at a few key
locations in the world.

 Their prices are set in relation to supply/demand pressures that

are specific to the products markets.

 Market prices can be used to set transfer prices between a

refinery and a distribution affiliate, so as to understand how
much margin is made in both segments.