"Upstream" and "downstream" are business terms
applicable to the production processes that exist within several industries.
Industries that commonly use this terminology include the metals industry, oil,
gas, biopharmaceutical and biotechnology industries. Upstream, downstream and
midstream make up the stages of the production process for these and other
industries.
Definition of Upstream
The upstream stage of the production process involves
searching for and extracting raw materials. The upstream part of the production
process does not do anything with the material itself, such as processing the
material. This part of the process simply finds and extracts the raw material.
Thus, any industry that relies on the extraction of raw materials commonly has
an upstream stage in its production process. In a more general sense,
"upstream" can also refer to any part of the production process
relating to the extraction stages.
Examples
of Upstream Processes
In the petroleum industry, locating underground or
underwater oil reserves characterizes the upstream process. Additionally, the
upstream process in this industry involves bringing oil and gas to the surface.
Extraction wells represent an example of a structure operating in this stage in
the process. The upstream stage in the production process may also manifest
itself as a supplier providing raw materials to manufacturers or other
businesses that ultimately process the materials.
Definition of Downstream
The downstream stage in the production process involves
processing the materials collected during the upstream stage into a finished
product. The downstream stage further includes the actual sale of that product
to other businesses, governments or private individuals. The type of end user
will vary depending on the finished product. Regardless of the industry
involved, the downstream process has direct contact with customers through the
finished product.
Examples
of Downstream Processes
In the oil and gas industry, the downstream process
consists of converting crude oil into other products and then selling those
products to customers. Thus, oil refineries represent structures that operate
within the downstream process. However, any kind of plant that processes raw
materials may qualify as operating within the downstream stage of production. A
company that combines both upstream and downstream processes is an integrated
company.
by Brian Bass
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