Oil and gas must innovate. Blockchain can help
Oil and gas have been the foundation of global economic success for a century, enabling air travel, the electrification of homes and the extension of the infrastructure that makes our societies work. But even before the Covid-19 pandemic, there were those that are pointing to the environmental damage that the sector causes, both in terms of the extraction process and the ongoing emissions that are produced as natural resources are transported and consumed. These observers suggest that the world would be a better place if we reduced our reliance on oil and gas and moved instead to a cleaner world where power was provided by renewable, or even nuclear, alternatives.
While it is possible to argue with some of the evidence against natural resources, it is very difficult to argue against all of it. In a world where even Saudi Arabia has publicly expressed its ambition to move beyond oil and gas, it seems likely that sooner or later things are going to change.
The problems are time and resource.
In an ideal world, we could switch the global infrastructure from one source of power to another in the blink of an eye. In reality however, it would be a monumental undertaking that would take at least two decades. According to many studies, the actual process of transition could cause more environmental degradation than carrying on as we are. For example, electrifying the global motor fleet would involve massively increased consumption in rare-earth minerals for car batteries and the process of changing freeway service stations from providing refined petroleum to electric charging points would require a massive infrastructure investment. There is a lot of work being done to ensure that this process takes place, but it is going to take time.
Keep looking to windward
So how should the oil and gas industry respond? Do nothing and run the risk that renewable technology will suddenly leap forward? Wait for regulators to change the rules? Watch the buying public slowly turn away from oil and gas as viable, cost-effective alternatives increase their market share?
There are very few management-strategy books or seminars that suggest that repeating the same activity will eternally yield the same positive result, and there is little doubt that innovation is going to be key to managing the changing conditions that oil and gas faces.
In short, now is the time to start investigating options and embracing innovation.
How the blockchain helps
One of the ways that this can be achieved is through embracing techniques that will make the most of the natural resources that are drawn out of the ground and reduce the casual acceptance of waste.
The blockchain has significant promise in this regard. A smart contract can be used to assign a value to a volume of oil or gas, which can be visibly managed throughout the supply chain from confirmed reserve, through the extraction and refinement process, and all the way to the pump or plug.
Using this approach will make it far more clear where waste is taking place because it will be possible to see very simply how much natural resource is associated with a contract when it is drawn out of the ground and where the amount associated with that contract changes, even when it has been intermingled with resources from elsewhere. If you can pin down where the waste is happening, you can quickly see where to focus your efforts and whether those efforts are having an impact.
As well as reducing costs, it will also make it possible to credibly stand up in front of governments, regulators and the public and explain what measures are being taken to ensure that a project is as efficient as possible.
This may become an increasingly important factor in the natural resources sector as the short and long-term challenges created by Covid-19 become more apparent.
We clearly should be transitioning to cleaner forms of energy, but in the meantime, we need to make the most of the infrastructure that we have in place. Blockchain can play a key role. To find out more about PermianChain’s approach, join us at permianchain.com
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.
