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Blockchain within the oil and gas industry

May 15, 2019

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Digitalising our businesses - blockchain within the oil and gas industry

Muneeb I Shah, Blockchain Partner, Blockchain Consulting & Advisory, Service Transformation, Wipro Limited explores how blockchain can be used in the oil and gas markets.

https://www.wipro.com/Blockchain has evolved far beyond its bitcoin origins and has demonstrated itself to be a game changer in the technology arena. In the energy industry, challenges come forth in the form of numerous stakeholders, large supply chain networks, complex transactions that often require cross-border payments, and a wide range of documentation.

As the demand for efficiency, transparency and cost cutting continues to grow, intelligent technological innovations are imperative. Introducing advanced technology like blockchain can prove to be effective in redefining the present system. Given the diverse possibilities blockchain technology has to offer to mitigate the challenges in the oil and gas sector, determining the potential applications of blockchain technology should be the first step. Following are the main areas of potential application:


Digitised records

Tracking land rights and ownership on a blockchain platform is one of the most highly-visible use cases of blockchain technology in general. Blockchain technology can simplify and make the documentation and processes more robust, globally. For oil and gas companies, records are critical, whether it’s company land records or mineral transactions or identity management/certification in the upstream segment - all documentation should be accessible and in one place.

However, data is often haphazardly collected, and maintaining documentation and transactions becomes a tedious process. Manual data entry and technologically backward accounting methods add to the cost and time. Blockchain technology is capable of providing a clear, immutable record of all information which can be determined and managed by the consortium of stakeholders.

So, within the network of oil and gas companies, a blockchain payment system could speed up the process, as well as cut cost and time. The application of smart contracts can automatically structure that data into a digestible format, removing the need for manual re-organisation. Automating paperwork for international shipping could make the process more efficient, while also dramatically reducing costs. Additionally, companies could utilise blockchain to manage the certifications of their employees, sequence of workers and their identity by integrating an identity construct on the blockchain.


Transparency/Security

Some of the consequences that arise from having numerous parties involved in the operation of the oil and gas sector include field errors, a lack of trust between the stakeholders, legal issues and less visibility of data.  Blockchain technology has the potential to significantly reduce if not remove such discrepancies in the process. The immutable and accessible ledger could significantly improve the operation efficiency of the oil and gas industry by enhancing trust among parties and enabling more transparent transactions at each stage of the process. All the details pertaining to the transaction are simultaneously visible to everyone.

Smart contract integration can ensure data is shared with certain entities whenever necessary, and permission constructs can ensure certain individuals or groups do not have access to another stakeholder’s proprietary information. This step could also make the stored data less likely to succumb to cyber fraud and tampering.


Eliminate reconciliation and enhancing compliance

Reconciliation is a time-consuming process in the oil and gas sector— with companies using extensive period of time to ensure all parties are compensated. Intermediaries and complex processes affect the exchange of data, payments and audits in real time. Blockchain-enabled application can address this issue by reducing or removing fractional costs that make current transactions slower and more expensive. Smart contracts will eliminate manual transactions and third-party involvement by making all transactions automatic.

The oil and gas industry is heavily regulated with protocols - deriving from various regulatory authorities from environmental to taxation. Since all the transactional data is stored on a blockchain network which can be accessed in real time, regulatory bodies will be able to maximise visibility in the industry.


Supply chain tracking

The supply chain implications for blockchain technology are especially valuable for majors and National Oil companies (NOCs) in all stages of oil and gas production — upstream, midstream, and downstream. With large administrative overheads and complexities involving shippers, suppliers and consumers, data transparency between operations can be almost impossible to provide. With the integration of a shared system through the distributed ledger system, tracking and identifying the complete supply chain of the raw materials from place of origin to end user would become possible in real time. With supply chain visibility and data security in the downstream segment of the industry, providers could allow consumers to ensure safety, regulatory compliance, and authenticity.

This can help improve accountability within the industry. Additional track-and-trace capabilities could also be appended onto the blockchain to provide shipment visibility in real time. Tracking the flow of assets from well to refinery across an enormous network of cargo routes, rail routes, and pipeline infrastructure is of paramount importance to oil and gas stakeholders. With secure data tracking, manufacturers can trace regular maintenance updates.

Smart contracts could also be implemented to ensure that accidents during any of the processes that can cause environmental and health impact are contained and responded to in a timely manner. The ability for this kind of real-time, immediate data gathering and sharing means that companies and regulators can spend less time trying to figure out what happened and take action immediately.


Reward programs

In the downstream segment, blockchain technology can be leveraged towards customer loyalty and satisfaction. With gasoline consumers, downstream companies can implement a series of smart contracts to reduce the cost and improve the user experience of maintaining customer loyalty rewards. Organizations with many partners, subsidiaries and joint ventures can leverage blockchain to integrate their disparate loyalty programmes. This can allow customers to accumulate loyalty points across various participating platforms and use rewards cross-system. Rewards are tracked, immutable, and theoretically liquid if tokenised. This way, blockchain based rewards program builds loyalty, reduces management, and improves cost.

Blockchain technology will allow companies across industries to improve cost, reduce waste, increase optimisation, and control data transparency. Altogether, this leads to increased operational performance and service delivery, lower cost for end users, and better resource allocation for the world. With its present complexity and global reach, may oil and gas companies may look to explore and invest/ partner in blockchain initiatives.

Recently a group of seven oil companies, including American giants like ExxonMobil and Chevron, agreed to form the first industry blockchain consortium that aims to explore the potential benefits that blockchain technology can deliver to the space. With the willingness to evolve with time, and embrace change in today’s changing economic environment, the oil and gas industry has to most importantly identify right use cases to revolutionise the industry with maximum impact.


About the author:

Muneeb I Shah, Blockchain Partner, Blockchain Consulting & Advisory, Service Transformation, Wipro Limited

With 13 years of global experience, Muneeb is Blockchain Partner - Consulting & Advisory and leads the blockchain theme for EMEA at Wipro Limited. Muneeb’s role involves the evangelisation of Wipro blockchain solutions with customers and the global blockchain ecosystem.

His focus is to design blockchain / de-centralised ledger solutions for high-impact industry use cases, ecosystem and consortia development in the energy and utilities space. Muneeb works with leading Fortune 500 organisations to identify use cases for blockchain implementations, and support their objectives by re-imagining industry processes and business models enabled by this disruptive technoogy.

Prior to this, Muneeb played a key role working in payments area for standardising the payments messaging using ISO XML standards and working closely with the consortium of banks and industry bodies to define the ISO standards for payments messaging. He comes from a strong banking back ground with ability to understand both technical and functional aspects enabling him to contribute on both the ends.

Muneeb has a Master’s in Business Management and is a Computer Sciences Engineering graduate. He is also a member of NACHA workgroup for enabling Real Time Payments.

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