Blockchain in oil and gas
With the perfect storm of regulations, costs and consumer demand to face across multiple jurisdictions and international borders, supply chain management is critical to the success of global oil producers. Blockchain is uniquely positioned to offer a new technology-based solution for managing global supply chains. If you are new to bitcoin visit this page for your trading and investment needs.
The protocol allows for data transparency, traceability, immutability and settlement, significantly improving the current methods used by industry participants. Furthermore, these terms are not mutually exclusive, as blockchain can also serve as a decentralized ledger that provides an immutable record of events with which all parties can verify the accuracy of transactions.
The case for blockchain in oil and gas is similar in structure and purpose to the use of blockchain in the global trade supply chain. Oil trading transactions are complex and involve many stakeholders, including producers, storage owners, trading houses, shippers and ports.
Each transaction involves multiple parties, with financial settlement once delivery occurs at a specified location and the product has been inspected. Furthermore, the buyer will likely look to offset their purchase by selling a futures contract for this commodity, adding to the overall complexity of this process. The challenge is therefore to manage this complexity while achieving all the desired requirements and benefits of blockchain, including:
Objectivity and transparency
With the transparent ledger, all parties can verify that all data added to the chain is authentic. In a provenance scenario, this can provide oil producers with complete transparency about their steps in producing and delivering oil or gas to end consumers. This transparency can provide both auditable and open records for each step taken in the supply chain.
Safety
Blockchain technology is considered unhackable as multiple copies of transactions exist on different computers around the world. This means that there must be agreement from more than 51 percent of participating miners for a proposed transaction to be accepted. If a party conspires to change a transaction or create one that was not originally added to the blockchain, they will not have sufficient consensus in the network and the transaction will not be accepted.
Multiple use cases
Contrary to current industry practices, blockchain offers many ways to manage supply chains (eg, tracking products from discovery to discovery through transformation, shipping, storage and eventual sale). For example, oil producers can easily use intelligent contracts for seamless trading across locations. A manufacturer can use the blockchain’s distributed ledger technology as a global digital signature of the entire transaction, including financial payment terms and contractual terms related to product delivery.
Smart contracts
Blockchain can store the terms of an agreement between parties in a programmable form on the blockchain that is distributed across all nodes. This means that the parties do not need to hire lawyers to draft extended agreements with various clauses stored on paper or stored in various databases around the world.
The ability to manage complex supply chains using blockchain technology is essentially limitless. In addition, smart contracts are for various insurances such as oil spills, property damage, climate change, etc. For example, suppose a party was found responsible for pollution or an oil spill that disrupted the operations of downstream companies. If so, smart contracts may have a use case for speeding up compensation payouts and fines.
The speed of transactions that blockchain technology can provide is also a significant advantage for the oil and gas industry. Transactional data can process millions of times faster than today’s manual processes.
The use of blockchain can also increase the transparency of an oil company’s operations and help track them. Smart contracts written with specific industry and legal standards can help with decisions regarding regulatory matters, human resources, environmental compliance or even labor rights. For example, an insurance company can leverage an intelligent contract for financial claims on a resource event such as an oil spill or a pipeline leak.
Summary:
Blockchain technology is developing rapidly, and there are many potential applications for this disruptive new discovery in the oil and gas industry. The case for blockchain in oil and gas can be even more compelling to stakeholders with the benefit of smart contracts, which provide a set of terms written into the chain and enforce specific conditions and proof of certain events.
As the use of blockchain grows in supply chains, industries such as food, pharmaceuticals and financial services are likely to join the ranks of other industries that have already implemented this decentralized ledger technology.
