Efficiency must be the future of the energy industry (Part three)

With major energy producing nations and companies looking to a future beyond oil and gas and viable alternative sources of energy starting to gain momentum, the oil and gas industry needs to look at new ways of working and embrace efficiency if it is going to continue to hold its central position in the global economy.

This is the final part of a three-part series of articles examining the need to enhance efficiency in the oil and gas sector. In the first article we discussed the challenges the sector faces, and explained what the blockchain is. In the second article, we looked at how the blockchain could enhance efficiency across the discovery, extraction and distribution phases of an oil and gas campaign. We will now turn our attention to how the blockchain can massively enhance the industry’s investment and trading model.

A new strategy for oil and gas financing

As we discussed in the last article, the blockchain business model enabler could bring new levels of efficiency to the way that oil and gas extraction, refinement and distribution projects are managed, but it also opens up an exciting new area to support the equity financing of the sector.

By tokenising oil and gas reserves at an early stage in the discovery process, they become a tradable commodity and more so an investable digital security. There are two aspects to this.

Primarily, there is the potential to create a trading and investment platform for discovered but not yet extracted reserves. A market such as this could attract oil and gas investors from new sectors, and could help the industry attract funding if larger institutional investors continue to drift away from the sector in search of more lucrative returns elsewhere.

Coupled with this is the second aspect, transacting in smart contract of tokenized oil and gas equity on a dedicated blockchain is significantly more efficient than current forms of oil and gas trading. There are several reasons for this, but broadly speaking, it boils down to two factors: administration costs are slashed and the need for brokers is massively reduced.

Administration costs fall in a digitally coded tokenized operating environment because the majority of administrative activities are transparently automated through the blockchain. Third-parties can complete their tasks and have their work authorized far more quickly, hold-ups in the process can be isolated, analyzed and alleviated with far less manual intervention and it is easier to ensure that everything that comes out of the ground reaches the refinery if complete integration is implemented.

Equally, broker involvement is reduced because the sector becomes far more transparent, contracts can be traded cheaply without the need for convoluted, expensive and sometimes extraneous processes.

Trade contracts earlier and for longer

What this means is that the price of trading in the oil and gas sector could become significantly lower in a blockchain environment. This in turn means that the sector becomes far more open to a wider array of potential investors. Furthermore, due to the nature of blockchain smart contracts, oil and gas companies do not need to manage the process manually because the system will be set up to manage regulatory expectations and make payments automatically as appropriate as Smart-Off-Take Agreements (SOTA) become standard industry practice.

This is the approach that PermianChain is taking by introducing a fully integrated platform for the digitalization of oil and gas reserves in the form of digital assets. With real-time datasets, tokenized equity of oil and gas companies become investable digital securities with justifiable underlying value. We want to bring new efficiencies to the sector so that a wider audience of investors can be involved.

If you would like to learn more about PermianChain and how it is setting out to evolve the oil and gas sector, get in touch via our social media channels and join our announcement channel on telegram.

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 for its regulated digital securities trading and investment platform.