Blockchain technology is here to stay.
Most commonly associated with trading cryptocurrencies, blockchain technology is a virtual digital and decentralized ledger system that records online transactions in groups known as blocks.
The oil and gas industry already stepped into the blockchain revolution. But the real question is how quickly it can take advantage of the opportunities the blockchain offers.
Why is blockchain technology popular?
Blockchain provides a unique, immutable record of transactions and documentation between multiple parties and can reduce errors and invalid transactions in energy trading.
The result is more efficient financial transactions and interoperability. Blockchain can also handle a large amount of data, which is of great importance for all trading operations in the oil and gas industry.
A recent global Deloitte survey is a leading indicator of where the blockchain is heading. The survey included more than 1,000 global blockchain executives from nine industries and seven countries.
- 72% of respondents believe that blockchain technology will have a significant impact on the oil and gas industry;
- 61% of respondents believe that blockchain is just a currency database and can only be used in the financial services sector;
- 87% of respondents in the oil and gas industry believe that their understanding of the blockchain is “excellent” rather than “expert” level;
- 72% of respondents in the oil and gas industry invested in between $1 million and $10 million, while only 9% invested more than $ 10 million;
- 38% of respondents have spent more than $10 million in automating the organization;
- Only 15% of organizations in the oil and gas industry applied blockchain to production, while 84% are in the experimental phase.
What is the role of blockchain technology in the oil and gas industry?
The energy sector benefits significantly from blockchain technology.
Oil and gas resources play a crucial role in the energy field. The energy sector is also one of the industries that will have great potential for blockchain technology applications. It is a vast market and one of the most suitable to implement blockchain technology.
After developing for more than a decade, blockchain technology has become a massive trend in various industries. This technology is continuously improving and striving to find a better application experience, from the earliest bitcoin applications to applications in multiple industries.
Blockchain as a transparency and cost reduction tool
The oil and gas industry is gradually digitized and automatized. Many large oil and gas companies are working to implement blockchain technology.
Blockchain in the oil and gas industry can bring many benefits and an improvement in the management, efficiency, and security of data. It can cut administrative processes and costs and eliminate errors when used in tandem with smart contracts.
Blockchain allows all entities involved in a transaction to use a distributed and established computer network that records and stores each transaction or data exchange in the system.
What is Blockchain in energy sector?
According to a publication on blockchain technology in the oil and gas industry, the places that currently have the fastest pace of developing blockchain applications in the oil and gas industry are Europe and Asia.
The application of blockchain in the oil and gas industry is still in the experimental phase and without sufficient investment.
The oil and gas industry is a large system that includes multi-party transactions and trading, paperwork and reconciliation.
There are several significant problems in the oil industry:
- A large amount of paperwork and time costs transaction
- The risks of fraud, errors and inefficiency of transactions are considerable high
- Relatively high trade costs, the inefficient trade negotiation process
- Slow exchange of critical data
- Relevant data is at higher risk of cyber attacks
Because of the named problems it faces, it is time for the gas and oil industries to change their way of management. In the last two years, the emergence of blockchain technology has prevailed in the oil and gas industry.
The big giants in the industry have started investing in the development of this technology. The pioneers in the introduction of blockchain technology are BP and Shell. In 2017, British Petroleum (BP) began testing the first blockchain project, allowing the oil and gas industry to take over the first step in applying blockchain technology.
Innovative software solutions for the Oil & Gas industry
The oil and gas industry has many pipelines around the world. Those pipelines require precise and regular maintenance to avoid and prevent any damage to the pipes linked throughout the pipeline.
We have successfully implemented the PIMSF system into state-owned gas transport company Plinacro in early 2019. Operators and engineers use this system to streamline pipeline integrity activities and upgrade their performance.
PIMSF (Pipeline Integrity Management System) is a cloud-based enterprise platform for assessing pipeline conditions, likely threats, risk assessment, and mitigation actions to ensure the safe and incident-free operation of the pipeline system.
Using PIMSF or implementing custom-tailored IT solutions for your business processes helps you enhance your existing workflows, cut overall costs to a minimum and maximize outputs.
Where to apply the blockchain technology?
Blockchain technology is currently applied in many industries. It can be potentially of great use in the oil and gas industry, especially in the aspect of management and decision making, trading, and cybersecurity.
This innovative technology is used in situations with large volumes and frequency of transactions, when cross-border entities are involved, and when data from previous transactions is used for the next transaction or the following entity.
One of the most common transactions in the oil and gas industry is trading. Petroleum products, crude oil, natural gas and petrochemical products are traded through the entities and several different parties (shipping agents, surveyors).
Trading involves manual processes to confirm quality tracking, payment and other necessary items.
In oil and gas, trade transactions are prone to fraud and compromise, and they often create errors. Blockchain technology can successfully solve this problem and make every transaction transparent.
Blockchain is an excellent platform for achieving transparency and a distributed book, in which data and details of transactions can be stored.
Creating a smart contract is one of the possible solutions. A smart contract is one of the most powerful features that a blockchain can offer to any industry.
Smart contracts automate transactions between the parties, without the need for an intermediary like a bank or a lawyer.
It can simplify the process, significantly reduce paperwork, improve efficiency and save costs. A smart contract is one of the essential concepts in Ethereum.
Benefits of using a blockchain:
- Decreased manual efforts through automation
- Reduced reconciliations and disputes
- Delays in the process due to the search for data and documents
Management and decision making
It is time for the oil and gas industry to change and improve its old management mode and level.
In management decision-making, a lot of information is stored in an independent system. It, therefore, poses a challenge to obtain data in real-time. The structure, protocol and data format of these systems are not necessarily the same or interoperable.
Blockchain technology can make data exchange and transmission more efficient, thus improving the correctness of decision-making. It can simplify the management process and make the management method more scientific.
Oil and gas pipeline networks have a crucial position in oil and gas systems. The pipeline network is complicated and challenging to manage, especially regarding resource allocation.
If the relevant demand data and supply data are uploaded to the blockchain and form a smart contract, the deployment of oil and gas resources can be made more scientific.
If the pipe network’s relevant information can build a blockchain, the integrity or reliability management of the pipe network will become more successful.
As threats to cybersecurity for the oil and gas industry grow exponentially, various strategies have been implemented to protect the company’s computer and management systems. The advent of effective blockchain technology has redefined cybersecurity in this area.
For hackers, oil and gas companies have many vulnerable breakthroughs:
- complex operating system and production process
- the little intersection of information technology (IT) and operation technology (OT)
- delay of a real-time system caused by a firewall
- inconsistency of network standards among departments
- irregular updating of system security patches (especially vendor’s security system)
If blockchain technology is used to store essential data in a distributed manner, the risk of network attacks can be effectively reduced.
Blockchain addresses vital cybersecurity issues such as remote access, role-based access control, password rotation, and fingerprint Industrial Control Systems (ICS). No surprise, it’s becoming a new standard for protecting the oil and gas industry.
The future of blockchain technology solutions
Blockchain oil and gas trade represents the future of investment in the energy sector.
Due to decentralization and transparency, blockchain technology brings numerous opportunities to the gas and oil industry.
New technologies can help the oil industry and companies achieve significant cost savings and efficiency improvements, opening many opportunities for technology suppliers and users.
Blockchain solutions transform the ways companies and individuals do business locally and globally, simplifying transactions and increasing their efficiency.
Companies looking to reap the benefits of the technology should work with experienced companies who can increase size while providing cyber-security controls and standards for protection against external attacks.
If you want blockchain to become part of your business strategy and are looking for an agency that will turn your ideas into marketable solutions? We provide consulting and software development services for the oil and gas domain. Contact us today!