Incorporating Blockchain in the Oil and Gas Industry
Blockchain technology is emerging as one of the hottest topics in the oil and gas industry. Blockchain along with its associated technologies, have managed to garner headlines as well as massive investments from the private sector; this includes a number of energy companies and various public sources, like federal and state agencies.
The oil and gas industry has, of late, transformed itself into a very data-intensive industry with machine learning, artificial intelligence, and internet of things. With this immense expansion and growth, distributed ledger technology, often called blockchain, can help carry the industry's transformation forward.
With more than $325 million invested in 2018 alone, it’s worth mentioning that the banking and finance industry is pouring a lot of money into various energy-focused blockchain technologies.
The modern oil and gas industry is characterized by hefty investment and cooperation and collaboration among multiple parties, particularly on the upstream side. However, even on the midstream and downstream side, there’re many transactions, ownership changes, and information exchanges that are taking place across several companies. Note that this is because of the inherent trading nature as well as bulk movement of several commodities comprising crude oil, gas, refined products, and petrochemicals. These factors make the blockchain technology ideal for the oil and gas industry, especially in areas where there’s a change of ownership, multi-party collaboration and sharing of expenses.
In addition, it is important to note that the industry’s stringent regulatory and legal requirements coupled with the need to frequently share information with governmental agencies is another factor that makes distributed ledger technology such as blockchain very relevant.
Blockchain’s power and relevance in the oil and gas industry comes from the fact that all nodes on that network have all the same information, which means that once any transaction is committed on the network, it’s almost impossible to change or modify the history of that transaction. This is because as all relevant parties in the network will have to agree to make the change, which ensures that each historical record is like the “golden copy.”
Also, the entirety of a value chain starting from production through to cash payments is yet another area where blockchain could be significantly useful. Blockchain technology can also be used to track and identify raw materials based on their specific source in order to improve quality control. The efficient distributed ledger system could identify and track the entire supply chain of raw materials from the point of origin to end user.
Tracking payments and managing division of interest through blockchain would help lower payment errors while eliminating the risk of fraud since historical records could not be changed.
Blockchain offers a smart and intuitive trade platform for reliable and efficient execution of energy trades. In addition, the distributed ledger system could keep track of joint ownerships and asset management.
There is no doubt that if used smartly and efficiently, blockchain could turn out to be a real game-changer for the oil and gas industry in the digital age and will reinvent and redefine your asset management across the board.