Collaboration is the future: Breaking down the silos in the oil and gas sector

We recently discussed how technology built and then gradually dismantled the walls between silos in many businesses and even industries [Collaboration is king] by making it simpler to look at data from several perspectives. We believe that there is another set of silos that are in desperate need of being more closely linked but have struggled to work together: The upstream, midstream and downstream activities of the oil and gas sector have traditionally been discrete. That could be about to change.

The oil and gas sector is incredibly complex, with a bewildering array of organisations playing a role in finding natural resources, moving them from the ground through the refinement process and then getting them to the places where consumers need them to be.

For the sake of simplicity, the industry has divided the steps from origin to ultimate destination into three phases:

• Upstream, the exploration and extraction phase
• Midstream: the transportation, storage and wholesale market phase
• Downstream: the refinement, purification marketing, distribution and retail sale phase

One product, three silos

While there are is crossover between the three phases both in terms of expertise and activity, as well as a handful of multi-national conglomerates that straddle different phases, the level of crossover between the three phases is relatively low.

From one perspective, given the complexity of the processes involved, there is little surprise that organisations tend to focus on a relatively small aspect of the process.

On the other hand, given the pressure on margins, the fine line between a project being viable, the administrative and brokerage costs that are accrued and the need for the industry to manage its wastage, these silos could be seen as problematic.

What’s the answer?

There is no getting around the complexity of the oil and gas sector. There are very few industries in the world that include such an extensive list of in-depth activities, from geology to chemistry to engineering to marketing.

Technology is in the process of offering a way of streamlining the process however.

The blockchain, which is the underlying technology that supports cryptocurrencies but can be used for a myriad of other activities, creates a way to assign a value to a product or service that can be associated with it throughout its lifetime.

PermianChain has looked at this from an oil and gas perspective and created a platform that will help manage assets from exploration right the way through to retail consumer. Using the Permian Token it will become much easier to manage oil and gas through the production process, understand where there are inefficiencies and wastage, both in terms of physical product and its administration, and take steps to ameliorate any problems.

The token will make it far simpler for authorised people to keep track of the process of assets as they make their way from upstream, through midstream and to the downstream phases of an oil and gas project. It will make it possible to manage supply chains, and revenue strategies, in a way that would have been inconceivable a decade ago.

Silos can develop around processes and ways of doing business, and in some instances they develop for practical purposes. The problem is that after a while they can solidify inefficiencies and actually start to hold back the businesses they were developed to support. We believe that tokenising oil and gas assets and making the process far more transparent will be a significant improvement in the efficiency of the oil and gas sector.

PermianChain Technologies is a pioneer member of the Blockchain Research Institute. PermianChain is investigating ways to harness the power of blockchain technology, data science and artificial intelligence to digitize, tokenize and monetize proven but undeveloped natural resources, starting with oil and gas. The PermianChain, which already has secured oil and gas reserves to be listed on its platform, intends to unlock liquidity to revolutionise the way that oil and gas reserves are funded, produced, bought and sold on a permissioned-access blockchain. The firm is currently in the process of applying to for its regulated digital securities trading and investment platform.