How to Use Blockchain in Oil and Gas Industry
In 2018, BP, Shell, Repsol, Gazprom and other major players in the oil and gas industry launched pilot blockchain projects to solve logistics, trade and financial problems. In the article we will look at these and other cases to understand how the new technology is used in the oil and gas industry and what advantages it gives.
As it is. On the way from the place of production to the final consumer, a drop of oil and a cubic meter of gas have time to change several owners, interact with at least 30 counterparties and figure in 200 information solutions. All these iterations are reflected in the document flow of each event participant, and they, as a rule, use different approaches to recording and storing data, which causes a lot of errors and inconsistencies.
The complexity of this process causes such problems:
Thanks to this network, you can achieve the following benefits:
First successes. At the time of this writing (February 27, 2019), two projects have been launched in this direction, both of which are at the stage of Confirming the concept. The first is the IBM and Abu Dhabi National Oil Company (ADNOC) platform for launching an automated accounting and transaction management service for the sale of petroleum products (and other raw materials) from wells to final consumers.
The second is the development of OOC OIL & GAS BLOCKCHAIN CONSORTIUM, which included ConocoPhillips, ExxonMobil Corp, Chevron Corp and 4 more major players. They check all possible options for the blockchain implementation in the oil and gas industry, including automation of accounting and auditing.
As it is. The price of raw materials at points of sale depends not only on the amount of oil and gas, but also on their quality indicators (composition, density, amount of impurities, etc.), which are measured with special equipment — provers. For example, oil companies use flow meters to measure the volume of oil sold, a specific gravity meter to determine the weight of the raw material, a centrifuge to determine the percentage of oil containing basic sediment and water (BS & W).
According to Scotty Perkins, senior vice president of innovation for Quisitive, concerns about accuracy and fraud lead market participants to the fact that oil producers and pipeline operators use their own equipment to check the flow of raw materials and its composition.
Such equipment costs from 125 to 500 thousand dollars, and its duplication leads to an increase in costs for both parties, which in turn leads to an increase in the cost of goods for the final customer.
How it will be with the blockchain. If you connect the prover to the blockchain, then all parties will be able to obtain accurate data on the volume, density and impurities in the raw materials from one set of equipment. Consequently, there is no need for duplication of equipment.
First successes. In May 2018, Quisitive, a subsidiary of Fusion Agiletech Partners, provided the Validation of a pipeline monitoring and data collection concept that oil producers and pipeline operators use to maintain crude oil cleanliness standards. Their project was named Blockchain Oil Pipeline.
In their development, Quisitive used Blockchain Workbench, Microsoft Azure and the Internet of Things (IoT) to create a platform that can serve as a single, secure and reliable source of data for all stakeholders. Blockchain Oil Pipeline operates according to the following algorithm:
Other problems include:
How it will be with the blockchain. Unlike the financial sector, the blockchain technology in the oil and gas industry does not remove intermediaries in supply chains. Instead, the distribution registry, smart contracts and IoT tags allow you to track the movement of equipment, vehicles and raw materials in real time and collect this information into a single pool of reliable data.
In practice, this gives the following advantages:
Along this route went:
First successes. In 2017, Natixis, IBM and Trafigura launched a pilot project of IBM Bluemix for the purchase and sale of raw materials. Testing took place on the US crude oil market. The site allowed real-time sharing of current data on payment, shipment and delivery of goods. Typically, this requires complex "paper" procedures, couriers for the transfer of paper documents and faxes / emails - for digital.
In the same year, a similar solution was tested by the Swiss trading company Mercuria Energy Group in the supply of crude oil from Africa to China using the block trading platform Easy Trading Connect, created in collaboration with ING and Societe Generale. The experiment showed that the blockchain reduces the time of operations from several hours to 25 minutes. Especially it was liked by traders who increased their efficiency by 33% due to a reduction in commission.
The result of the cooperation of the consortium is the VAKT Global trading platform, which is currently being tested in closed mode, that is, only members of the consortium have access. Open VAKT testing should start in the first quarter of 2019.
As it is. The Indian multinational company Tata Consultancy Services, providing services in the field of information business and IT consulting, conducted a computerized study of the oil and gas market in terms of adopting the blockchain in the context of data security and compiled the following table.
How it will be with the blockchain. The introduction of the distribution registry and smart contracts will give such effects:
Other interesting numbers: