Blockchain technology may be approaching the business mainstream as its most well-known application – cryptocurrency — made the July cover of Forbes magazine, but the application is still closer to the back page for the oil and gas sector.
Billed as internet 3.0, blockchain is an electronic distributed ledger seen as a possible way to automate time-consuming, expensive and sometimes economically risky processes, such as verification, settlement and supply chain logistics for the commodity sector.
Financial service providers are already moving from using blockchain for simple ledgers to higher-level uses, such as “smart” contracts that can automate tedious elements, speakers at a Houston, Texas, conference on blockchain use in oil and gas said this week. A few flip-flop and sneaker wearers joined the usual ranks in boardroom-ready shoes to consider whether it makes sense for the sector to take the next digital leap.
Despite a few early adopters in oil and gas — trader Mercuria is experimenting with it — “we are still at blockchain 0.0” said Priya Aswani, a Microsoft data solution architect who works with the industry on creating blockchain networks.
The heavily regulated oil and gas industry seems to be waiting to see if a fancy-pants technology that emerged from the bitcoin realm can really do a roughneck’s job – or at least that of an energy accountant or broker.
The list of possible applications for blockchain in oil and gas is long: autonomous oil fields, royalty payments, land registries, supply chain and logistics, and trade reconciliation.
Just as long is the list of reasons why deployment in the commodities space may have years to go: a lack of central data sources, necessary high-dollar technology investment, compliance requirements, the need for competitors to cooperate for certain uses, and privacy concerns.
“If you are a trader, you might ask, ‘Will that mean my competitors can see my trade strategy? Why would I want to share that?,’” said Talib Dhanji, a partner in the commodities practice of EY.
Getting past those questions requires a focus on value and profit for traditional oil majors, said Wole Olugbenle, with ExxonMobil’s technology innovation unit.
The power sector has made notable strides, particularly in the use of blockchain in distributed generation. Owners of tiny power generators that feed into the power grid – imagine rooftop solar panels – can be paid with fewer bookkeeping and payment steps, for example.
For wider use in oil and gas, the sector needs to overcome not only technological hurdles, but also cultural ones, said service provider Halliburton’s chief data scientist Satyam Priyadarshy. He pointed out a recent survey showing that about 70pc of oil and gas managers still use email as their primary communication tool – a mode considered in IT circles as where data goes to die. Even an internal blockchain network would require a new way of thinking about information for many companies, Priyadarsky said.
Still, “it is time for us to do the transformation instead of just talking about it,” he said. “We have been talking about it for the last three years.”