Blockchain continues to do wonders for industries ranging from finance to health, and now, the oil and gas industry. Its adoption will almost certainly transform the sector to a more transparent and efficient and effectively bring back its glory days.
For the first time, blockchain will now be used in oil production and operation activities. A group of seven oil companies including Chevron and ExxonMobil just came together and formed an oil blockchain consortium. The objective of the consortium is to explore the full benefits of blockchain in the oil sector.
ExxonMobil will not be lonely in the venture into blockchain. Startups like Vakt will join the oil industry giant in the exploration of potential use cases for the technology in the energy sector. The startup purposes to address major problems currently being experienced in the energy sector. So far they have managed to accumulate funds amounting to $490 million.
Challenges In The Oil And Gas Industry
We have seen better times in the oil industry. The world is currently at crossroads and in a polarizing debate weighing between the benefits of renewable against non-renewable energy in. Carbon emission has been the villain in today’s deteriorated climate and fossil fuels like oil are to blame.
It may be hard to tackle such a problem using blockchain. But before the problem is tackled, the oil industry itself needs to evaluate its own operations to reduce the damage that may cause more harm. This means an overhaul in its procedures to reduce insecurity in documentation and human error. You see, the energy industry is coupled by a wide range of documents from invoices to bank release fund and shipping statements. Making these documents easily accessible can be a nerve-wracking task.
The oil sector also experiences too many complexities in its supply chain which involves global shippers, customers, and suppliers. Managing such a sophisticated chain can be a backbreaking task. Now couple this with cross border payments structures for different countries and the task is even tougher.
Blockchain can help mitigate these risk or even solve them once and for all in a number of ways.
Digitizing Crude Oil Transactions
Using blockchain, oil transactions can be digitized to enhance transparency, security, and efficiency and Natixis, a French company, is already doing it for US crude oil transactions.
In a blockchain system, all transactions are visible simultaneously on the chain and this improves transparency. Since blockchain is immutable and distributed at the same time, cases of fraud are minimized to zero. Intermediaries are also done away with hence reduced overhead costs.
Private networks can safely store employee and contractor records and certifications. Besides boosting trust, it also assists in cutting down of hiring costs.
An Oil Cryptocurrency
Imagine crypto that has been pegged against oil. It could make a viable replacement for fiat currencies. The currency also provides a way for the direct transfer of value between various parties without the need for banks as intermediaries.
Improved Compliance And Hydrocarbon Tracking
Augmenting Blockchain’s transparency maximizes regulatory body’s visibility and is a boost to an already heavily regulated industry would be a boost in ensuring fair play.
You will also find that the merge of blockchain and oil enhances accountability especially when it comes to regulated substances. Blockchain provides the means to track the regulated substances at their various stages in the supply chain process.