There’s a new technological kid on the block, literally. But what does it mean for the energy industry? Keep reading for a preview of some of the invaluable information that will be discussed at this year’s Global Petroleum Show.
Blockchain is a digital decentralized ledger which is the foundation for digital coins such as Bitcoin. In cryptocurrency terms, new transactions are recorded in ‘blocks’, which when confirmed, are added to an existing ‘chain’ of previous payments. Effectively, blockchain technology can be used as an alternative form of banking, as it provides a means to freely distribute the data of your digital transactions online. Moving this process away from currency for a moment, the technology can similarly be used to collate large amounts of information and data in the form of databases, or in this case, digital contracts.
The energy industry is recognizing the disruptive potential that blockchain holds. With the help of James Graham, CEO of leading software company GuildOne Inc., here are the top three reasons why you’ll want to learn more about blockchain for the oil & gas industry:
- Blockchain can dramatically reduce the potential size and length of oil and gas disputes. This is done by creating a digital ‘smart contract’ that is reciprocally agreed upon by all parties, then positioning this checklist of agreed facts (whether measurements, geographical borders, royalty costs etc.) before the transaction itself. As Graham states, “You can think about it as all the counter-parties throwing their conditions into the middle and the smart contract executes everybody’s checklist before the transactions happen.”
- Blockchain can help to eliminate errors through creating consensus. Graham suggests one of the key benefits of blockchain for the energy industry is that it allows companies to transact trust, or value, with strangers, in a totally managed and consensual way. The digital contract that is initially agreed to becomes a collaborative document that allows for proposed alterations through a peer-to-peer structure, yet requires all parties to be in agreement before a change can be enacted. Similar processes are used regularly in the financial sector to ensure that all groups remain on the same page throughout the contractual process.
- Blockchain could oversee a reduction in both the time and money that is currently demanded by existing energy processes. This is achieved by creating a shared data and computing infrastructure that can benefit both consumers of energy, by enabling them to trade directly with energy producers, as well as large energy corporations themselves, by sharing workloads and costs. Graham points toward a visible “net gain” that would emerge over time, “because you’re moving people in the same data infrastructure and those infrastructural costs are borne by multiple parties”.