Blockchain technology has quickly become one of the hottest trends for the oil and gas industry. Blockchain, as well as the associated technologies, have generated a lot of headlines and some significant investments in the private sector; that includes several energy companies and pubic sources, such as state and federal agencies.
The oil and gas industry has gone through a transformation of sorts recently. It has become more data-intensive than ever before and now incorporates artificial intelligence, machine learning, and the Internet of Things. With such huge growth and expansion, the blockchain – also known as distribution ledger technology – can only keep this transformation going.
With over $325 million invested in the industry in 2018 alone, it’s worth mentioning the banking and finance industry has put a lot of money into energy-focused blockchain technologies.
Our modern oil and gas industry has been characterized by heavy investment and cooperation and collaboration with various other parties, especially when it comes to upstream oil. However, even with midstream and downstream, there are a lot of transactions, information exchanges, and ownership changes happening all the time at lots of different companies. This is because of the trading nature inherent in the industry, along with bulk movement of a range of commodities comprising gas, oil, petrochemicals, and refined products. These are factors that make the blockchain technology a natural fit for oil and gas, particularly with changes of ownership, shared expenses, and multi-party collaboration.
It is also worth noting the stringent regulatory and legal requirements in the industry, as well as the need to constantly share information with government agencies. These are other important factors that make the blockchain such an interesting prospect.
The power and relevance the blockchain has for the oil and gas industry is thanks to the fact that the nodes on the network all have the same information. As soon as a transaction is committed through the network, it is almost impossible to alter the history of the transaction. That is because the relevant parties in the network all have to agree to the change, ensuring that each historical record of a transaction is the “golden copy”.
Another area where the blockchain could help the oil and gas industry is the entirety of the value chan from production through to cash payments. Blockchain can be used to identify and track raw materials based on where they are sourced from to improve quality control for companies. An efficient distributed ledger system would be able to track an entire supply chain of raw materials from the point of origin to the final end user.
Using the blockchain to track payments and manager division of interest helps to prevent payment errors and eliminates the risk of fraud as historical records on the network can’t be changed.
The blockchain provides a smart and intuitive trade platform to make efficient and reliable energy trades. The system can also keep track of asset management and any joint ownerships.
There’s no doubt that the blockchain, if handled smartly, effectively, and efficiently, could be a game changer for the oil and gas industry for the digital age. It will redefine and reinvent asset management across the board.