The Future of the Vast Oil and Gas Industry Depends on Blockchain
Innovative oil and gas companies are leveraging blockchain, but the industry as a whole may be slow to adopt the technology.
The age of digital transformation has arrived, leading traditional industries to adopt new technologies to accommodate a fully digital future. As such, it shouldn’t come as a surprise that the trillion-dollar oil and gas industry has quietly started to leverage blockchain technology for business success.
Douglas Heintzman, chief catalyst at the Blockchain Research Institute, said the oil and gas sector is particularly ripe for blockchain development because of its uniquely positioned supply chain. “There are many participants in downstream and upstream operations within the oil and gas industry,” he said. “The industry must now look at all the processes built and developed over the last 80 years and ask themselves how to drive radical amounts of productivity and efficiency into the system.”
While there are a number of ways that blockchain can be applied to an industry such as oil and gas, the technology specifically provides a single source of truth within a complex sector containing multiple participants.
Raj Rapaka, digital innovation adviser with ExxonMobil and board member of Blockchain for Energy—a consortium of energy companies focused on bringing blockchain-based solutions to the sector—said that the oil and gas industry primarily recognizes blockchain as an important technology used to reduce friction when interacting with external parties. “There are many suppliers, vendors, contractors, and other parties involved in the oil and gas sector," he said. "Blockchain provides a single source of truth, along with other features that make the technology appealing.”
According to Rapaka, these specific characteristics are being pushed within the oil and gas industry to ensure recognition that the technology will help the sector become more efficient moving forward.
Smart Contracts Automate Manual Processes
To put this in perspective, Rapaka mentioned that Blockchain for Energy recently helped oil giant Equinor leverage smart contracts to confirm various transactions.
Rebecca Hofmann, president and CEO of Blockchain for Energy, said that the consortium initially piloted a solution with blockchain company Data Gumbo back in 2019 and 2020. The pilot combined industry operators—along with their customers, suppliers, and vendors—and incorporated real-time sensors to gather data to validate transactions across a blockchain network.
According to Hofmann, the “Commodity Transport smart contract” solution was first piloted with produced water to prove that the technology was capable of helping with end-to-end automation.
“We call this ‘extreme automation’ because everything is touchless," she said. "Connected IoT sensors gather the data, which then gets written to a blockchain ledger for validation. These invoices are then approved by smart contracts, which create invoices for automatic payments.”
Given the success of the trial, Hofmann explained that Blockchain for Energy helped automate an extremely manual process within the oil and gas industry supply chain. “There are about 23 manual touches that take place between all major oil and gas companies within the supply chain. We now have this number down to four,” she said.