Helping the oil and gas sector reach its potential (Part II)
In the last article, we asked if, presented with a blank sheet of paper, anyone would design a structure for the oil and gas industry that looks anything like what we have today. Given the complexity, variety and sheer number of activities involved in getting oil and gas from the ground to the consumer, the system’s circuitous nature is perhaps unsurprising, but perhaps it is time to take a long look at what we have, and ask ourselves whether there is a way that it could be better.
There are several technologies that could feed into this process. One of the most exciting is the blockchain.
A lot has been written about the blockchain, but in short it is a distributed global ledger that shared across multiple global sources. These sources are constantly referenced back to each other, so any discrepancy in the data can be quickly spotted and remedied. Think of it as a de-centralised, transparent database where everyone with authority can see the information, make appropriate additions and understand how and where changes have been made. This makes the information on the database incredibly difficult to falsify.
Why this approach has so many people excited in the oil and gas sector is because the industry could create a database that covers assets all the way from exploration and discovery right the way through to domestic delivery.
There are several advantages to this approach:
- It would make it simple to see where there was inefficiency and waste within a specific part of the extraction and production process;
- Organisations could see where there was a discrepancy between 100 barrels extracted at an oil-field and 92 barrels that arrived at a refinery;
- Administration costs would be massively reduced because rather than waiting for paper or even email documentation, blockchain verification would be virtually instantaneous;
- Brokerage involvement would be massively reduced because the whole process would become far more transparent. This again would significantly reduce overall cost of extraction;
- It would become easier to attach a value to a natural resource far earlier in the extraction process, making it easier for exploration firms to manage their businesses more efficiently;
- It would be easier to answer any regulator’s questions about provenance, which could become important over the next few years given what has been achieved in terms of reporting expectations in the financial services sector;
- Because the price of trade would be significantly lower, the industry could attract new liquidity without having to rely on traditional sources of investment;
- The industry could show itself to be forward looking, which could be important from a public perception perspective over the next few years.
That’s a relatively long list of benefits to come from a single technology. There is also a long road between recognising the benefits and realising them, but we believe it is a process that is worth pursuing. If you would like to find out more about how PermianChain is helping the oil and gas sector move to a more efficient future, please follow us on social media.
PermianChain Technologies is a pioneer member of the Blockchain Research Institute. 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 become a regulated digital securities trading and investment platform.