As a concept, blockchain can be hard to get your head around. Even for those people that truly consider themselves “geeks”, it can be a bit of a headscratcher. In layman’s term, though, this technology – initially created to prop up the (now astronomically successful) digital currency Bitcoin – is based on several key principles; a distributed database, peer-to-peer (P2P) transmission, transparency and unchangeable records.
What’s particularly interesting for us here at TriStone Holdings, however, is the technology’s potential applications within the O&G sector. We took a deep dive into what makes blockchain technology so unique, and how the oil industry could benefit.
What Is Blockchain?
At its core, blockchain is a ‘distributed ledger technology’ (DLT). So… what’s that? Distributed ledgers are databases spread across several locations; in the case of blockchain technology, this data is stored across the globe across thousands of different servers. This decentralisation removes the need for any third-party involvement and prevents any form of record tampering from taking place. Blockchain is a particular kind of DLT and its perhaps easiest to think of it as this:
“Blockchain is a type of DLT – but not every DLT is an example of blockchain technology.”
It’s even more financially secure than other DLTs which is why it’s seen such success in the cryptocurrency market. But how can this transactional technology help the oil and gas sector?
How Could O&G Benefit?
According to a report by Deloitte back in 2017, there are several ways in which blockchain technology could help improve the oil and gas industry. These are as follows:
The oil and gas industry has become much more compliant and responsible in recent times, with the fast-and-loose attitudes adopted by large players a half-century ago (quite rightly) no longer tolerated. The logical next step is to improve fiscal transparency, wherever possible, and blockchain technology could provide that. That is, after all, one of its greatest appeals and a large part of why it’s been so successful over in the financial industries.
In an industry as large and economically profitable as O&G, security is always going to be an important issue. Whilst blockchain technologies are far from infallible, the immutable nature of the transactions they record is particularly attractive from an anti-corruption and AML perspective. Oil companies are conducting greater levels of due diligence than ever before, but blockchain technologies could help take that work one step further in the future.
3. Streamlining Processes
Trade processes – whatever the industry – tend to have various pain points and inefficiencies; blockchain technology could help eliminate these. Energy traders centre themselves around the principle of speed. Legacy trading frameworks often hamstring that rapidity but blockchain technology does no such thing – it’s quick and incredibly efficient.
Which Companies Are Adopting The Technology?
In summary, blockchain technology facilitates a reduced cash cycle time, less costly overheads and enhanced transparency (and security). Are oil companies ready to adopt such a big shift, however? Well, it seems like actually yes they are! Industry giants like Shell, Equinor and Saudi Aramco have all taken the plunge investing in ambitious blockchain start-ups. In fact, just this week it was announced that Equinor’s latest offshore platform ‘Johan Sverdrup’ was incorporating state-of-the-art blockchain technology.
Cultural shifts rarely take place overnight, and though this technology is far from commonplace across the industry, it’s gathering steam with every passing year. The ‘smart contracts’ that blockchain platforms enable simply look too good an opportunity for many oil companies to feel like they can miss out upon.
Whether it be improved maintenance and error reduction in upstream settings, IoT integration in midstream operations or within the logistics and transportation of downstream processes, blockchain technology could benefit them all. This nascent technology has already taken one sector by storm, and there’s no reason to think it can’t do the same in the O&G sector, as well.
Contact TriStone Holdings
So, if you’d like to find out more about our oil investment company, which focuses predominantly on onshore prospects in the USA, then get in touch with us! Contact TriStone Holdings Ltd today on 0800 055 7079 or by emailing us at [email protected] We’d love to hear from you.