Oil & gas consulting
The oil and gas industry is divided into different subsets within the industry. Operational components are divided into three main areas: Upstream, Midstream and Downstream. In this video, Dan provides an overview of each area and discusses their relative attraction for investment.
The oil and gas industry is divided into different subsets within the industry. Operational components are divided into three main areas: Upstream, Midstream and Downstream. In this video, Dan provides an overview of each area and discusses their relative attraction for investment.
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4 mins 42 secs
The Oil and Gas Industry aims to meet global energy demands. It is characterised in to; the upstream, involving finding the resource and its commercialisation, midstream, which revolves around transportation and the downstream for a further refinery. These projects are largely capital-intensive and hence require financing options, e.g. corporate loans to ensure profitability to all parties involved.
Key learning objectives:
Explain the three operational components of the oil and gas industry
Discuss the different types of financing options available in the industry
Identify the numerous risk assessment factors when considering different financing options.
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Upstream operations consist of finding and developing fields to produce hydrocarbons (oil and or gas). The upstream sector is often referred to as the E&P business.
Hydrocarbons are found by drilling into wells and installing infrastructure in the vicinity. From this, fluids are received from the subsurface and are separated into crude oil or natural gas.
The E&P sector is hugely uncertain and requires management of risk. If the project is delivered on time and budget, the rewards for discovery can be material. As it’s involved with great risk, they typically seek to achieve returns greater than 15% before sanctioning.
This primarily consists of the transportation of oil or gas from the upstream facility to end consumers or for further processing in the downstream sector.
The Midstream infrastructure requires large capital investment. If operational, it represents an attractive investment to infrastructure or pension funds, delivering 6-10% returns.
It comprises of further processing at an oil refinery or petrochemical plant to convert crude oil into products such as:
These products are then marketed to end consumers. Downstream operations, particularly in oil refining, operate on very small margins compared to the upstream and midstream business.
Low crude oil prices will have a positive effect on refining margins as there is often a lag (no effect) from lower crude prices on diesel or gasoline prices.
Equity sources:
Third-party financing products:
Other sources:
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