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One Downstream 

Strategic imperatives for the evolving refining and chemical sectors

The downstream industry, although currently in its golden era, is likely to face disruption from a confluence of five forces in the future. Having a unified view of the industry is important for long-term success.

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Executive sumary

In the oil and gas business, the downstream segment traditionally includes refining, distribution and fuel sales, and marketing to retail and commercial customers. However, with growing interconnectedness between refining and chemicals, in terms of feedstocks, opportunities for process integration, and evolving end-markets, much is changing. In this report, we propose a “One Downstream” view to explore the trends that can impact both oil and gas downstream and chemicals.

Currently, the downstream business seems to be in the midst of a golden age, driven by a heady combination of low feedstock prices and healthy demand for both transportation fuels and chemical products. This recent period of healthy growth and profitable margins, however, may not necessarily signal brighter days ahead.

In fact, risks that have been on the horizon but were perhaps masked by near-term margins have started to strengthen, causing many downstream companies to worry about potential disruption. And while these risks—feedstock changes, long-term sustainability, the state of globalization, end-market disruption, and large-scale technology transformation—are already converging margins among the refining and chemical sectors individually, an emerging confluence of these risks may challenge the current arms-length transfer pricing integration and siloed segmentation in the entire downstream value chain.

Given the complexity of the market forces that could transform downstream in the next decade, it is important for companies to consider ways to tackle them. The cost of ignoring this interconnection and missing the One Downstream view of the industry is expected to be high for any participant along the downstream value chain. In this report, we provide a brief but comprehensive study of the forces of disruption on the horizon and their potential impact on each downstream segment and share considerations for seeing these forces as interconnected rather than merely linear or isolated.

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