The oil and gas business is increasingly
embracing blockchain in an era of 'lower for longer oil prices' which some
believe is now morphing into an era of 'lower forever' prices.
To the uninitiated, a blockchain is akin to a
digitally distributed ledger that can be replicated and spread across many
nodes in a peer-to-peer network, thereby minimising the need for oversight and
governance of a single ledger.
Each transaction on the ledger is recorded
and added to the previous one. These additions result in a growing 'chain' of
information.
One industry expert – Samuel Kramer, a
Chicago-based at partner at Baker & McKenzie, believes blockchain holds the
potential to freshen up processes and standards in the oil business, that in
the eyes of some is a bit of a laggard when it comes to digital adoption.
Speaking at the 2017 Baker
& McKenzie Oil & Gas Institute in Houston, Texas, USA, Kramer said:
"[Digital] Information sharing and operational transparency initiatives
are integral to circular collaborative ecosystems in the oil and gas industry,
and by extension in the utilities market. I believe the sector's deployment of
blockchains and smart contracts is only going to grow."
And with good reason, at a
time when the oil and gas industry is looking
for efficiency gains and cost optimisation. "Since no single
party is entrusted with all the information, blockchain essentially
self-monitors, providing data reliability. I believe using a blockchain itself
to embed contracts would add a lot of value into the supply chain and remove
issues of fraud and corruption," Kramer added in response to a question by
IBTimes UK.
Furthermore, blockchain is
an enabler and digital disruptor for oil and gas companies adjusting to a more
efficient "new normal."
Kramer said legal services
providers are finding increasing recognition among oil and gas sector clients
that the emergence of cryptocurrency bitcoin and blockchain have provided
alternatives to traditional processes.
"Blockchain can
simplify supply chain financing. Of course, blockchain is not so much the
transfer of payments, but rather the smart coding of contracts that self
execute."
However, the Baker &
McKenzie partner admitted that adoption has some way to go before the oil and
gas business can claim the usage of blockchain to be widespread.
"At moment, I count
smart contracts and blockchain among the many digital innovations impacting the
oil and gas industry – ranging from cognitive computing to predictive
analytics.
The digitisation journey
extends beyond fintech to physical aspects of the oil and gas business.
"For instance, look at smart sensors. On
average there could be 80,000 sensors on an oil rig. Smart
analytics premised on information gathered
from sensors can revolutionise rig operations, help reduce health and safety
incidents, prevent oil spills, assist in water conservation, aid in reduction
of CO2 emissions – really the journey is just beginning."
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