Guide to Oil & Gas Refining & Marketing Industry KPIs

The oil and natural gas industry is often divided into three segments; upstream or the business of oil and gas exploration and production; midstream, which includes transportation and storage; and, downstream, which comprises refining and marketing. In this guide, we primarily focus on the downstream segment of the energy sector’s value chain. For information on the upstream segment, please refer to our guide on Upstream Oil & Gas KPIs.

Downstream operations involve refining and marketing crude oil. Refining is what gives crude oil its value. Refineries take raw crude oil (such as WTI and Brent) and refine it into usable fuels and other petroleum products such as gasoline, jet fuel, kerosene, and diesel, among others. That puts refining companies in the last link of the oil and gas industry’s three-part value chain. The petroleum products created through the refining process are used for a variety of purposes such as residential and commercial heating, fuel for vehicles, generating electricity, and for petrochemical products among others.

The refining process involves three basic functions; distillation, conversion, and blending. The first and most basic step of refining is distillation, which involves the separation of materials based on differences in their volatility. Next is conversion involving breaking up heavy molecules into lighter (and more valuable) hydrocarbons. And lastly, blending, which involves mixing the optimal combination of components to produce the final finished product. Refineries that process crude oil can be either simple refineries or complex refineries, depending on the complexity of processing the crude oil. Simple refineries mainly execute the distillation process, whereas complex refineries perform two additional functions, namely; conversion or cracking, and blending.

Marketing refers to the wholesale and retail distribution and sale of refined petroleum products to businesses, industries, governments, and end consumers. The addition of marketing assets to a refinery portfolio generally creates a more stable, higher-margin income stream than can be achieved through independent refining operations alone.

The refining industry is a global and highly cyclical commodity business in which profitability is sensitive to marginal changes in product supply and demand. Marketing, on the other hand, is more regional and generates fairly steady cash flows. They do, however, exhibit some volatility but on a short-term basis when oil prices move up or down, in a short period.

Key performance indicators (KPIs) are the most important business metrics for a particular industry. When understanding market expectations for the Oil & Gas Refining and Marketing industry, whether at a company or industry level, some KPIs to consider include:

Refining

• Refinery Capacity Per Day (Mbpd)
• Refinery Capacity Utilization (%)
• Refinery Throughput Per Day (Mbpd)
• Refining Gross Profit/(Loss)
• Gross Profit Per Unit - Refining (Per Bbl)

Marketing

• Marketing Sales Volume (M Gallons)
• Average Price Per Unit - Marketing (Per Gallons)
• Gross Profit Per Unit - Marketing (Per Gallons)
• EBITDA Per Unit - Marketing (Per Gallons)
• Operating Income/(Loss) Per Unit - Marketing (Per Gallons)