Getting Closer to Consumers: Downstream Supply Chain

The final touch in the highly sophisticated and competitive crude oil industry to provide the end products to consumers is done with the Downstream Supply Chain. This part of the industry is instrumental in the final processing, the distribution of products and marketing. The crude oil is processed into finished products such as heating oil, lubricants, asphalt, fertilisers, plastics, synthetic rubber, and pharmaceuticals. This is the point where the supply meets demands and there is an interface between customers and companies.

The following steps are included in the downstream sector:

• Refining: This integral process transforms the extracted crude oil into diverse substances that can be readily used. Fractional distillation is the process employed for The removal of unwanted substances takes place and after the refinement, the fuels are transported elsewhere in the refinery for processing.
• Processing: The natural gas is rendered usable when water and other impurities are removed. The processed natural gas is extraordinarily useful and is utilised for a diverse range of products.
• Marketing and distribution: A lot of factors influence marketing and distribution such as demand and supply, pricing, distance, political and economic situation.
• Retail: This stage largely depends on excellent customer service skills.

The downstream sector brings about a wave of employment opportunities such as tax accountants, hazard analysts, plant operators, contract managers, maintenance supervisors, instrument engineers, quality assurance managers, audit personnel and so on.

Read our exclusive blog; Is fuel glut moving downstream?

Four key opportunities have been identified for Downstream Supply Chain:

• They must focus on operational excellence.
• Strong trading capabilities must be built.
• The scale of refinement must be expanded on the global scale.
• Campaign for subsidies reduction or removal on refined products.

However, there are challenges in the Downstream Supply Chain as well:

• Lack of integration in business: Joint Ventures
• Global refining capacity
• Corporate communication
• Marketing and Distribution activities for oil products
• Mechanism of crude supply
• Environmental concerns

Learn why collaboration is the next big thing for the oil and gas industry

Overcoming these challenges requires professional expertise and will majorly influence the demand and supply and in turn the price of oil and gas. The crude oil industry exercises significant influence in the world today. Every other commodity in the market is directly affected by oil and gas. Almost 35% of the world’s demands are met through Oil. Thus, it is extremely crucial to address the challenges and solutions through innovation in technology to maintain global economic equilibrium.

Some of the leading names that are efficiently handling the downstream sector are- ExxonMobil, Petro China, Gazprom, Rosneft, Lukoil, Reliance Industries etc. They have successfully turned around the way crude oil is extracted, produced and distributed.

Technology can bring about a major revolution in the downstream sector of crude oil. It can significantly transform the processes of marketing and distribution. Blockchain technology is a major development in the present times and can make a huge difference in the operations of industries working on a massive scale such as crude oil. Petroteq Energy Inc., a Canadian based company decided to embrace blockchain technology. It has allowed the company to gain competitive advantage and cost efficiency.

Liked this tutorial? Read about upstream and midstream

The downstream stage is an important aspect of the petroleum market. All the stages together create processed goods out of an incredibly precious fossil fuel which is empowering the world as we know it.