The downstream benefits of PermianChain
As we move into the 2020s, the long-term future of the oil and gas sector seems less assured than it was a decade ago. There’s competitive pressure from increasingly credible renewable alternatives, challenges from regulators and significantly less warmth from investors. If oil and gas is going to maintain its central role in the global economy then it needs to evolve. One of the most efficient ways of achieving this would be through embracing technology.
Enhancements in technology have the potential to help the oil and gas sector ensure its future, making the process of discovering, refining, transporting and delivering natural resources significantly more efficient and transparent.
The PermianChain platform has been designed to deliver these enhancements without the need for significant investment on the part of oil and gas firms. Using modern, blockchain technology, PermianChain can be integrated with existing systems and working practices to deliver efficiency and transparency that will bring down costs, satisfy regulators and attract the attention of investors of all sizes.
At this early stage in our development we are focusing our efforts on the upstream activities because that is where we can initially do the most good, but the mid- and downstream benefits could also be significant and will be on the agenda as we move through our development phases.
In this set of articles we have examined the benefits of the PermianChain platform from three perspectives. We started looking at the upstream, before turning our attention to the midstream. This final article will outline the benefits for downstream oil and gas organisations.
The oil and gas sector is extraordinarily complex, pulling in expertise from across the economic spectrum, including geographers, geologists and geophysicists, chemists and engineers, as well as transportation and logistics, real estate, sales and even marketing experts.
This complexity makes it incredibly hard to accurately manage a supply chain.
The PermianChain platform creates a great deal more clarity around supply chains, helping identify where hold-ups are happening and letting related third-parties across the process understand how a situation is evolving. This massive enhancement in transparency will help organisations manage their inventories more efficiently than has ever been the case in the past.
Deliver efficiency to customers
The less efficient a process is, the more expensive the associated product becomes for the end customer. The rising efficiency and falling cost of renewable energy means that the oil and gas sector must keep prices as low as possible to remain competitive.
The platform that PermianChain has created offers several efficiency benefits that are significant enough to translate to lower prices for customers. One of the largest is that it will dramatically reduce the involvement of brokers and transaction agents within the system.
PermianChain creates a transparent market for oil and gas that basically removes the need for brokers to be involved in the sales process of an oil and gas contract. While brokers deliver a great deal of expertise to the sector, that expertise comes with a considerable price, as we discussed in this article recently. Reducing the involvement of brokers will take a significant amount of cost from an oil and gas project which should translate to lower consumer costs.
Prove transparency to investors and regulators
For regulators, investors and, possibly to a lesser extent, consumers, there is increasing focus on transparency and the ability to prove the provenance of a range of goods and services.
This has tended to be very difficult to achieve in the oil and gas sector, not least because of the complexity of the process of moving natural resources from wellhead to point of consumption.
The way that the PermianChain has been developed using the blockchain makes the provenance of oil and gas simple to prove. Each barrel of oil or volume of gas is assigned a value at the point that it is confirmed (even before it is extracted), and that value remains associated with it throughout its journey from the ground to the ultimate consumer.
This means that regulators and investors will be able to see the entire history of a barrel of oil and or a volume of gas. From a consumer perspective this might not mean very much, but for regulators it will make it far easier to discourage corruption and ensure that society receives the correct benefit from natural resources. Equally, from an investor perspective, it becomes more possible to ensure that the firms being supported are as efficient as possible.
Having a positive story
It is imperative that the oil and gas sector convinces consumers, regulators and investors that it is evolving, embracing new technology and reducing inefficiency and waste.
Looking at it from an external perspective, there are some very significant challenges for the oil and gas sector, specifically its perceived inefficiency, potential for corruption and the damage that it is said to be doing to the global environment.
Moving to the structure that PermianChain has developed will give the oil and gas sector a positive story to tell, one that proves that the problems with efficiency, waste and corruption are being tackled.
The industry could carry on as it is, but that seems unlikely to be a productive strategy in the long term. Technology has created an opportunity for the oil and gas sector to make many of the changes that need to be made, and from many perspectives, the rise of alternatives and the impact of Covid-19 makes making the changes imperative. PermianChain’s approach means that the benefits could be released without the need to make significant investments in restructuring working practices or augmenting the back office.
This is the third in a set of three articles. The first examined the upstream benefits of the PermianChain, while the second looked at the potential midstream benefits.
If you would like to find out more about the work that PermianChain is doing, you can follow us on Twitter @PermianChain or read more of our articles on Medium.
PermianChain is a proprietary technology platform that brings together the crypto-mining and oil and gas sectors. Using a permissioned access blockchain, PermianChain makes it possible to utilise stranded and wasted energy resources, unlocking liquidity and transforming the way that oil and gas projects are funded, produced, bought and sold. Established in 2018, PermianChain Technologies is a pioneer member of the Blockchain Research Institute (BRI) and start-up member of the Petroleum Technology Alliance Canada (PTAC).