Oil & Gas: Are brokers necessary with blockchain technology? (Part two)

When a new technology or business strategy arises, there is often a debate among specialists within an industry about how it can change current working practices and who is likely to be impacted the most. Blockchain’s arrival appears to have exacerbated the gradual erosion of the broker’s role in the oil and gas sector, a process that began in the mid-nineties with the arrival of the spreadsheet and increased pace as technology became smaller and more user-friendly.

We could now be on the cusp of the post-broker model for the oil and gas sector. Brokers were used to manage the interrelationships between data, knowledge and the sector, but it is increasingly possible to achieve more, quicker, and at lower cost without needing them to be involved.

This is the second of two linked articles. In the first part, available by following this link, we looked at how technology has changed what is possible and what is achievable in the oil and gas sector, and how this changing dynamic has led to an evolution of the role of the broker.

The change in what’s acceptable

The oil and gas sector used to work in very close cooperation with the institutional investment community. The larger financial organizations had the scale to support exploration and extraction projects without having to complicate the investment process with multiple investors. However, broker relationships across the oil and gas sector and the financial markets meant that the process of building support for a project could be completed relatively quickly and without too much hassle for the firms involved.

Recent years has seen the relationship change somewhat, with some of the larger players in the financial markets focusing on opportunities away from oil and gas. At the same time, the rise of the blockchain has made it easier to manage investor information without creating additional layers of costly and time-consuming administration. This has made it possible to seek funding from a far wider audience without having to rely on a broker’s good office.

What the oil and gas sector is now trying to develop is a platform that will be simple to use for everyone involved, approved by regulators to ensure that it is safe from an investor perspective, and flexible enough to take changing conditions into account.

Delivering new opportunities

The evolution is also creating new opportunities, such as the chance to put a value on confirmed but not yet extracted reserves, which PermianChain is in the process of turning into a tradable asset. With an estimated 1.6 trillion barrels of oil reserves globally, the PermianChain will allow investors the opportunity to own a share of the world’s natural resources reserves.

Ultimately, like many sectors, oil and gas is in a constant state of change. At this point, the pace of change has increased but the downside of this from the brokers perspective is likely to be that their role be reduced as it becomes easier to store and manage data, and the sources of potential funding in the sector change.

PermianChain Technologies is a Pioneer Member of the Blockchain Research Institute where it 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.

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