How can the oil and gas sector use blockchain technology?

The oil and gas sector has been around for a long time. Maybe it doesn’t have as much heritage as the wine trade, shipping or insurance, but it’s safe to say that it has dominated both the global economy and the global energy mix for around a century. As a result, it has some fairly ingrained working practices that from the outside could look to be politely described as complicated.

For the people involved in the sector, most of these practices are there for a single reason: in the absence of anything better, they work.

The problem with this approach is that given the increasing levels of scrutiny that the sector is under, and the increasingly realistic challenge coming from renewables and other alternative sources of energy, just carrying on and assuming that the way things are done today will be appropriate in the future, could well turn out to be dangerously complacent.

But how can the oil and gas sector evolve? Economic textbooks are littered with case studies about firms that tried to revolutionise industries with radical new ways of working. Success in the oil and gas industry is so reliant on the interdependent network of suppliers, firms, brokers and investors that an individual organisation would be foolhardy (again putting it politely) to declare a radical new approach without making very sure that the rest of the industry was ready to move with them.

Purposeful evolution

Blockchain offers an opportunity for the oil and gas sector to increase efficiency, attract new sources of liquidity and reduce administrative and bureaucratic costs. Its influence is being felt across a range of industries and it is reaching a stage where it could begin to have an impact in oil and gas.

By creating a transparent, tamper-resistant ledger that encompasses all of the information that needs to be recorded about a project as it moves from exploration all the way through to the end consumer, blockchain complements and augments the way the sector currently works, without adding administrative cost or complication.

The PermianChain proposal

The PermianChain will help oil and gas firms and their potential investors gain a better understanding of the potential value of a field or project, while at the same time showing the operating firm’s commitment to enhancing transparency and efficiency.

By listing and registering potential oil and gas reserves transparently on the blockchain, the PermianChain will also help public organisations such as oil ministries and oil producing countries monetise their potential reserves, tackling liquidity requirements and reducing government deficits. As well as being significantly more efficient, PermianChain’s transparency will make it possible to prove the source of reserves and reduce or even potentially eliminate smuggling and illegal activities.

Contracts could be traded on the PermianChain using smart contracts to digitize the industry’s off-take agreements. Under a closed-loop B2B digital exchange platform we can foster, a global oil and gas trading network with transparent, up-to-the-second ownership rights. This will give everyone involved in a project a single point of reference that explains what stage has been reached, who is responsible for the next step and what the probable timeframes are.

Taken together, these innovations will help release significant efficiencies within the oil and gas sector. The pre-eminence of the oil and gas sector in the global energy mix is unlikely to be challenged in the short term, but this is not a time for complacency. The blockchain represents a significant opportunity to enhance efficiency and transparency without increasing administrative costs.

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PermianChain Technologies is investigating ways to harness the power of blockchain technology, data science and artificial intelligence to monetise proven but unproduced oil and gas reserves. The PermianChain, which already has secured oil and gas reserves with an upside of 55 million BOE 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 trust-protocol. The firm is in the process of applying to become a regulated trading and investment platform.

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