Upstream

Think of the oil and gas business as a river with three stretches. Upstream is the source, high in the mountains, where the water first appears from underground. Midstream is the widening channel that carries it onward. Downstream is the delta, where it finally reaches people as petrol at a pump or gas at a stove. Upstream is only concerned with one question: is there oil or gas under this particular patch of earth, and can it be brought to the surface.

In practice, upstream covers a specific chain of work. It starts with a seismic survey, essentially a sonar map of rock layers thousands of feet down, used to guess where oil or gas might be trapped. If the guess looks promising, a company drills an exploratory well, which is expensive and often wrong, since most exploratory wells find nothing worth producing. If it does find something, the company spends years and enormous capital turning that discovery into a producing field, building wells, pipelines to the nearest gathering station and processing equipment, before a single barrel is sold. None of this touches a refinery, a petrol pump or an LPG cylinder. Those belong to a completely different part of the business, with a completely different risk profile.

For most of independent India's history, upstream effectively meant one organisation. Oil and Natural Gas Corporation was set up in 1956 to do the exploring that private capital had little appetite for, and it found Bombay High in 1974, an offshore field off the coast of Mumbai that is still, five decades later, one of India's largest single sources of crude oil. Oil India, the other state explorer, worked the fields of Assam. Between the two of them and a handful of foreign operators, upstream stayed a largely state affair well into the 1990s, even as downstream refining and retail saw earlier waves of nationalisation and, later, private entry.

That changed only gradually. The New Exploration Licensing Policy opened upstream to private and foreign companies from 1999, and OALP and DSF, introduced from 2016 onward, made it materially easier for a company to pick its own block rather than wait for the government to offer one. The reason India has kept pushing on this front for three decades running is straightforward. The country imports roughly 85 to 88 percent of the crude oil it consumes, so every barrel found and produced domestically is a barrel that does not have to be bought abroad and paid for in dollars. That single fact is why an upstream discovery gets policy attention that a downstream expansion rarely does.

Because of this, upstream companies are judged on a completely different scorecard from the rest of the industry, reserve replacement ratio, meaning whether new discoveries are keeping pace with what is being pumped out, total production volume, and finding and development cost, meaning how many dollars it takes to bring one more barrel into confirmed reserves. None of these numbers depend on crude prices or refining margins, which is why an upstream-heavy company can have a very different year from a downstream-heavy one even when oil prices move the same way for both.

Whenever ONGC, Oil India, Vedanta or a Reliance-BP consortium announces a new discovery, or wins a fresh OALP or DSF block, that is purely an upstream story, and it is worth reading separately from a refinery margin update or a petrol price headline on the very same results day, because further down the river, an entirely different business is being run.