# Understanding the Midstream Stage in Oil and Gas Operations

## What Is Midstream?

Midstream is a crucial phase in oil and gas operations, focusing on processing, storing, transporting, and marketing oil, natural gas, and [natural gas liquids](https://www.investopedia.com/terms/n/natural-gas-liquids.asp). It acts as a bridge between the upstream extraction of raw crude and the downstream refining into consumer products. Understanding these activities highlights the importance of [integrated oil companies](https://www.investopedia.com/terms/i/integrated-oil-gas-company.asp) that manage all stages.

### Key Takeaways

*   Midstream operations in the oil and gas industry involve the storage, processing, and transportation of petroleum products.
*   Midstream activities are critical as they connect raw crude oil production (upstream) and refining (downstream).
*   Integrated oil and gas companies handle upstream, midstream, and downstream operations within their businesses.
*   The midstream sector is notably significant in the U.S. and Canada due to large privately-owned pipelines and storage facilities.
*   In Europe, crude transportation and storage are often integrated with upstream production, differing from the U.S. approach.

## Components and Functions of Midstream Activities

Midstream activities are often part of other operations in the global oil and gas industry. Midstream and downstream activities occur after the upstream phase and continue to the sale point. Many oil and gas companies are considered integrated because of their ability to combine upstream, midstream, and downstream activities as part of their overall operations. The midstream industry is more common in the U.S. and Canada due to large privately-owned pipelines and storage facilities.

For example, the Keystone Pipeline System, commissioned in 2010, spans Canada and the U.S. and is owned by [TransCanada Corporation](https://www.tcenergy.com/vendors). Other pure midstream operating companies include names like Oasis Midstream Partners, Sanchez Midstream Partners, Hess Midstream, Magellan Midstream Partners, and EQT Midstream Partners. In the U.S., the separate designation of crude oil transportation and storage supports the midstream industry.

## Real-World Examples of Midstream Operations

Magellan Midstream Partners owns and operates five marine storage terminals along coastal waterways, with about 26 million barrels of storage capacity. They also have around one million barrels of storage in a joint venture with Texas Frontera, LLC. The marine terminals provide distribution, storage, blending, inventory management, and additive injection services for refiners, marketers, traders, and other end-users of petroleum products. These key services, offered between upstream production and refining, are crucial to the midstream business.

In Europe, crude oil transportation and storage are usually integrated with upstream production. Major European oil companies such as Shell or BP tend to report production and transportation costs together in their annual financial results. Many European pipelines are controlled by national governments or state-owned oil companies. This state ownership tends to result in the absence of midstream as a separately designated part of the oil production value chain.

## The Bottom Line

In the oil and gas industry, the midstream stage is crucial, encompassing the processing, storage, transportation, and marketing of petroleum products. It serves as a pivotal link between the upstream production and downstream refining processes.

In regions like the United States and Canada, midstream activities often operate as separate business entities, such as Magellan Midstream Partners, which provide essential infrastructure through storage terminals and pipelines.

While distinct in North America, midstream operations may integrate more closely with upstream activities in Europe, reflecting differing industry structures. Understanding this stage can offer insights into the logistical and operational nuances of oil and gas production, helping stakeholders navigate investment and operational decisions effectively.