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Abu Dhabi, UAEWednesday 19 December 2018

Quicktake: Deciphering the energy industry's jargon

With Abu Dhabi International Petroleum Exhibition and Conference kicking off in Abu Dhabi, we explain critical terms that define the industry

Adnoc is planning to invest Dh165bn over the next five years with investors to expand refining and chemicals facilities in Ruwais ​​​​​. Victor Besa / The National
Adnoc is planning to invest Dh165bn over the next five years with investors to expand refining and chemicals facilities in Ruwais ​​​​​. Victor Besa / The National

The UAE capital this week will witness a flurry of activity on the energy front with ministers, energy executives and analysts looking to ink pacts, and brainstorm over the future direction of the industry. We try and break down the complicated jargon at the heart of the energy sector.

What is upstream?

Upstream simply refers to the first link of an energy company's value chain. It focuses on the exploration and production of hydrocarbon resources within concession blocks.

What is a concession or a block?

A concession or a block refers to a stretch of land or acreage that is appraised to contain potential reserves of oil and gas. Governments and national oil companies often tender these concession blocks in licensing rounds for energy companies to place bids.

What is a licensing round?

A licensing round is not too dissimilar to a tender, whereby a national oil company or a government authority offers seismic data. Energy companies will purchase the data on certain reservoirs onshore or offshore and appraise the land by spudding or drilling wells to gauge the potential for a field to contain significant extractable levels of oil or gas.

So what is downstream?

Downstream refers to the second segment of the energy value chain, which involves refining the oil that spurts out of the ground into crude grades that can be sold in the world oil markets. Refineries separate unwanted elements in oil such as sulphur so that the refined product can be used more efficiently in vehicles, in households or in the industry.

What are the common products of refining?

Gasoline, diesel, and jet fuel are the common products of the refining process. Refineries are huge feats of engineering with massive capacities being built in energy-hungry nations of India and China. The largest refinery in the world today is the 1.24 million barrel per day facility at Jamnagar in India, the scale of which is so big that if all the pipes were laid one after the other they would connect the whole of India from the north to the south.

What are petrochemicals?

Products such as naphtha, a crude oil product, and ethane, a gas, are used as feedstock or ingredients to create more complex products, namely polymers or plastics. Since consumption of plastics is rising in populous nations of Asia, the production of compounds such as ethylene and propylene - the building blocks of the polymers sector - are in high demand.

What is midstream then?

Midstream refers to the segment of the energy value chain that looks after the transportation of oil, gas, and products via pipeline, tankers, barges, rail or even trucks.