Workings of the Oil Industry


With the rising use of machinery running on oil-based fuels, oil has become one of the largest sectors in the global economy. It also supports the economy of countries in the middle east and others like Australia. The value of this industry has been increasing over the years in the case of the Australian economy. It is a very complex industry with a lot of complex processes and unique metrics that can overwhelm a new investor. The knowledge of the industry and the product is necessary to step into it. It is also vital to know processes that are important to specific areas like pipe relining in Sydney. Pipelines make up a network for both commercial and household transportation of oil in Australia.


Hydrocarbons are the basic building blocks that make up crude oil and natural gas. These are formed when plant and animal remains are compressed under different types of rocks like sandstone and limestone. These rocks are also plant and animal remains that have accumulated over time under bodies of water. As different levels of these rocks are formed, other remains get trapped between the layers. This organic matter undergoes compression at specific temperatures and eventually transforms into oil and gas. All this happens deep in the earth’s crust. As the oil and gas being formed is less dense than water they escape through the pores in the sedimentary rocks and get trapped under cap rocks. These make up the gas reservoirs and are nearer to the earth’s surface.

The oil and gas are extracted from the reservoirs by drilling. A well can be constructed after drilling to pump the oil up to the surface. Operations are closed down on wells that are not commercially viable. These wells are called dry holes.

Categorisation of the Industry

The oil and gas industry is divided into three segments based on their functions and limitations. These are upstream, midstream, and downstream.

  • Upstream – This sector of the industry involves companies that focus on finding and creating new reservoirs. These companies explore all the possible sites for reservoirs around the world and are often known as E&P which stands for exploration and production. These companies often involve high stakes and huge investments. The duration of expeditions is variable as exploration can take time. This sector is also very technologically advanced to aid the proper utilisation of reservoirs.
  • Midstream – As the name suggests, this sector is dependent on the success of upstream companies. They’re focused on transporting the extracted materials and involves shipping, pipelines and trucking. These materials are moved to the refineries for further processing. The companies are also capable of maintenance operations like the earlier example of pipe relining in Sydney. Pipe relining service in Sydney is when a new pipe is made inside a damaged one to reinforce it. This sector is characterised by high regulations and lower risks.
  • Downstream – The downstream sector is made up of refineries. These refineries process the extracted oil and make it fit for a variety of uses by removing impurities and converting it to different products like gasoline, heating oil and asphalt.

Drilling and servicing are two other facets of the oil industry that are not directly dependent on the oil for their revenue. E&P companies often avoid doing the drilling and outsource it to companies that specialise in it. The maintenance of these oil wells is another important task which is undertaken by service companies. There are fixed payment scales for such companies based on the amount of work.

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