When people put gasoline in their cars, few of them think about everything that was involved in bringing that product to the pump. Here are the basics of petroleum production:
There are two main sectors in the oil industry, which are upstream and downstream. Downstream activities entail the commercial aspect, e.g., the operation of service stations or the delivery of heating oil; while upstream operations regard extraction and refining. Extraction activities are further divided into two main areas, which are drilling and oilfield services.
Drilling companies drill wells and pump oil out of the wells. Drilling personnel are highly skilled and have much expertise; most drilling companies are contractors hired by big petroleum producers. They work on a variety of different “rigs”, including land rigs, submersible rigs, jack-ups, and drill ships. Only the first are used on land, where wells are drilled from 5,000 to 30,000 feet, while the other three types are used for drilling in swamps, lakes, and oceans. Oilfield service companies are the people who assist the drilling companies by manufacturing, repairing, and maintaining the equipment and machinery used to extract and transport oil. Some of their services are seismic testing, transporting, and directional services (when wells need to be drilled at an angle or horizontally).
Refining companies are usually very large firms who also market their product. Due to the very substantial amount of capital investment necessary to enter this field, it is dominated by a small number of big competitors. During refining, petroleum is separated and converted into fuels like gasoline, aviation fuel, LPG, and kerosene; it is also used to produce asphalt, lubricants, solvents, wax, and petrochemicals (which are in turn used to produce chemicals and plastics).
Alliance Insurance Group are specialists when it comes to insuring everything involved in both upstream and downstream activities, including workers’ comp, general liability, commercial vehicles, lease operations, contractors, pollution coverage, and more. Visit our Oil and Gas page or call us on 303-279-9700.