How Can Blockchain Provide Better Management in the Oil Industry?

Tracking and managing all the different parties can be difficult and time-consuming. Blockchain is an emerging technology that promises to make these processes more manageable. Visit a website like this app to trade in bitcoin with the help of advanced AI technology; the platform is suitable for even novice traders. In the below-mentioned portion, you’ll learn about supply chain challenges in the oil and gas industry and how blockchain can help manage these interactions. Then, we’ll explore blockchain, how it will improve oilfield management, and real-world examples of its benefits. 

Supply Chain Challenges in the Oil and Gas Industry:

For example, a barrel of oil is used to create many products, including gasoline, jet fuel, and heating oil. Each product has its value chain that involves multiple parties and transactions. For example, a barrel of crude may flow through multiple production facilities where it is separated into its components. Some will go to refineries for processing, while others will be transported to another facility or sold directly at a rack. 

Different buyers may purchase products at different prices depending on how long they have been stored in inventory, the location of purchase, or other factors. It creates a complex supply chain management situation involving tracking multiple transactions and parties. For example, contracts are signed in various formats, and the ability to track key contract terms, ownership information, and execution status can be difficult. Additionally, transactional information is captured in many different ways across multiple applications, making it difficult to analyze data to gain insights into operations.

According to PwC’s Survey on Blockchain Technology 2016, the oilfield services industry is one of the heaviest technology spenders among all sectors; this demonstrates how important it is for oil companies to leverage emerging technologies such as blockchain that have the potential to streamline their supply chains and improve operational efficiencies.

 It has the potential to streamline these interactions by facilitating secure and transparent interactions, removing the complexities and subjectivity of managing many different parties, contracts, and agreements. It may also provide third-party auditing of information captured in a transaction, providing a more reliable picture of oilfield activities.

How Blockchain Will Provide Better Management in the Oil Industry?

Some examples below highlight possible use cases for blockchain in the oil industry. 

1. Audit and Transparency in the Oilfield

We may use blockchain technology to store information on assets, activities, payments, and contracts. In the oil industry, all of these elements are critical to effective management but are often difficult to capture. Blockchain will enable all this information to be readily available anytime because it is captured in an open-source distributed ledger that can’t be easily manipulated or corrupted.

 In addition, it will help provide a complete picture of transactions to stakeholders that can also be audited for accuracy by a third party. Lastly, immediately auditing this information will help reduce fraud that occurs in the industry at high rates due to inconsistent data quality and lack of transparency.

2. Smart Contracts for Oilfield Trading

Intelligent contracts are defined by Nick Szabo and have been used in several industries to provide more trust in transactions. For example, in the oil industry, intelligent contracts can clarify end-to-end transactions by allowing for the automatic execution of conditions.

 For example, a contract could automatically trigger payments to be made if certain events occur, such as payment being accepted or delivery shipped to a seller.  It would allow for transactions to be completed more efficiently and at a lower cost since users would not require manual intervention after the contract has been agreed upon.

 Smart contracts could also help remove much of the subjectivity in invoicing. For example, if an oilfield service provider fixes a pump, their invoice might be for $1,000 for a one-hour labour rate and $500 for materials with a 10% contingency. However, if the issue is fixed in 20 minutes instead of one hour, they should still be paid as if it took one hour and 10%. These issues are often difficult to resolve, but blockchain may help resolve this by providing auditing capability of the transaction.

3. Track Asset and Crew Movements

In the oilfield services industry, assets such as equipment or crews must be physically tracked by people during their movement across various vendor locations and field locations. This process is often manual, requiring manual information entry into multiple systems. Users can use blockchain to track asset and personnel movements through RFID tags, GPS tracking devices, or any other identification system. This information could be captured in real-time and stored in a distributed ledger that is easily auditable and verifiable for accuracy. In addition, it will help remove many of the points of subjectivity currently present in areas such as inventory management, tracking assets through their life cycle, and damage liability disputes.