Response to the Canadian oil and gas industry’s open letter

The Financial Post recently published an open letter to Canadians from workers in the oil and gas sector. In it, the sector’s teams asked for support in this unprecedented period, pointing out that Covid-19 had transformed what was already a perfect storm for the oil and gas sector into nothing short of a perfect tsunami.

The letter points out that a combination of a price war between other global producers coupled with the global pandemic means that it’s now cheaper to buy a barrel of Western Canadian Select than a foot-long sub. This isn’t just a dry academic fact, prices this low put thousands of Canadian jobs in significant jeopardy.

The cold reality is that even before 2020’s unprecedented economic challenges, the oil and gas sector in Canada and around the world was going through a period of significant uncertainty. For the first time in half a century, its position as the catalyst of global economic growth was coming under pressure from three major directions.

Primarily, alternative energy sources are growing rapidly and, in some cases, getting close to becoming economically viable in comparison with traditional natural resources. Related to this, the environmental lobby has become increasingly vocal and moved towards the mainstream, reducing the willingness of some major investors to be involved in oil and gas. Finally, regulators have been starting to look at oil and gas and asking whether the sector could be more transparent, particularly given the strides that have been taken in similarly complex financial services sector.

What this means in short is that the coronavirus and its associated social and economic lock-down have arrived at possibly the worst possible time for the oil and gas sector.

In an open response letter, Mohamed El-Masri, Founder and CEO of PermianChain Technologies Inc., a natural resources tokenization platform focused on oil and gas companies in Canada suggests that this might be a good time to look at how the industry operates and move towards more efficient ways of working.

“Dear fellow Canadian oil and gas executives,

I share your belief in the Canadian oil and gas industry’s importance and potential.

This industry has provided reliable power for our homes and businesses for a long time. For the last five years, it has contributed on average CAD14.8 billion to government revenues, supporting our country’s ability to offer social insurance, health and medical care benefits.

The Covid-19 crisis has created unprecedented uncertainty, but it has also highlighted the importance of the rich natural resources that fuel our nation. They are ensuring that we, as a people, have equality of opportunity, the potential to sustain ourselves through tough times, and the opportunity to play a positive role on the global stage.

For the last two years my company has been developing a digital infrastructure that could serve as a reliable capitalization platform for natural resource companies across Canada. We have been focusing on oil and gas, because I felt that despite the economic uncertainties of the last few years, there is massive potential upside.

We have created a Blockchain Platform-as-a-Service (BPaaS) that enhances transparency, ensures efficiency in corporate communications, and unlocks new sources of income for the oil and gas industry. It has already proven to be a legitimate business model that can be implemented without interrupting day-to-day operations.

I believe that reliable digital solutions and technologies can create sustainable liquidity for oil and gas companies by removing the currently high investment barriers and opening seamless access to Canada’s undervalued oil and gas companies. This will be key to unlocking our country’s full potential. It can also massively enhance exploration and production business models so that efficiency is increased, returns are enhanced, and sustainability for resource finance is maximized.

I have personal interest in making sure that Canada’s oil and gas companies have a global market maker that serves your best interest, which ultimately is in the best interest of Canadians.

The challenges of the next few months mean that this is the right time for an open mind to implement new business models, to diversify revenue and adapt to a new digital era. If our industry is to be sustained, and help sustain Canada, through these tough times, we need a fresh outlook, a new perspective, and the flexibility to apply old methods in new ways. The industry was struggling before Covid-19 arose, not because there was a lack of demand, but because the strategies being deployed sometimes lacked efficiency and flexibility.

I invite industry leaders to join me in establishing the Canadian Oil & Gas Blockchain Consortium (COGBC) and adopt the PermianChain technology, a blockchain-based platform for tracking oil and gas capitalization events across the exploration and production process. This strategy will solve two of the industry’s main challenges, namely the funding challenge and the natural gas market challenge which over the next ten years is forecasted to generate CAD300 billion in economic impact and to employ directly and indirectly around 75,000 people per year. Meanwhile, the taxes paid to the federal and provincial governments from the upstream natural gas industry will total CAD45.6 billion over the next 10 years.

Establishment of the COGBC will allow us to work together to significantly reduce administrative costs and lower barriers to investment, making more projects viable and potentially attracting a wider pool of investors without increasing administrative burden. Because it is based on a transparent, virtually immutable platform, PermianChain can enhance its features to make it far easier to show investors and regulators how a project is progressing, and how companies are taking steps to manage any challenges in the supply of natural resources.

Ultimately, the oil and gas sector is more likely to receive the support it deserves if it can show that it is taking proactive steps to address some of the structural challenges it faced even before the emergence of the Covid-19 pandemic. PermianChain is ready for adoption in live beta and a proof of concept has already been deployed. It is ready to be extended at projects that want to be able to prove that they are making the best use of their financial and natural resources.”

If you would like to find out more, get in touch or register your interest with us through permianchain.com/”

PermianChain Technologies is a pioneer member of the Blockchain Research Institute and startup member at the Petroleum Technology Alliance Canada (PTAC). 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.