With the perfect storm of regulations, costs, and consumer demand to contend with across multiple jurisdictions and international borders, managing supply chains is critical to the success of global oil producers. Blockchain is uniquely positioned to offer a new technology-based solution for managing global supply chains. If you are new to bitcoin visit this site for your trading and investment needs.
The protocol allows for data transparency, traceability, immutability, and settlement, which significantly improves the current methods used by industry participants. Furthermore, these terms are not mutually exclusive as blockchain can also serve as a decentralized ledger that provides an immutable record of events with which all parties can verify the accuracy of their transactions.
The case for blockchain in oil and gas is similar in structure and purpose to the use of blockchain in the global trade supply chain. Oil trade transactions are complex and involve many stakeholders, including producers, storage owners, trading houses, shippers and ports.
Each transaction includes multiple parties, with financial settlement occurring once delivery occurs at a specified location and the product has been inspected. Furthermore, the buyer will likely look to offset his purchase by selling a futures contract for this commodity which increases the overall complexity of this process. The challenge, then, is to manage this complexity while achieving all of the desired requirements and benefits of blockchain, including:
Objectivity & Transparency
With the transparent ledger, all parties can verify that all of the data added to the chain is authentic. In a provenance case scenario, this could provide oil producers complete transparency into their steps in producing and delivering oil or gas to end consumers. This transparency could provide both auditable and open records for each step taken in the supply chain.
Blockchain technology is considered non-hackable as there are multiple copies of transactions on various computers around the world. It means that there must be an agreement from more than 51 per cent of participating miners for a proposed transaction to be accepted. If a party conspires to change a transaction or create one not originally added to the blockchain, they will not have sufficient consensus in the network, and the transaction will not be accepted.
Multiple Use Cases
In contrast to current industry practices, blockchain offers many ways to manage supply chains (e.g., tracking products from discovery to discovery through transformation, shipping, storage and eventual sale). For example, oil producers can easily use intelligent contracts for seamless trading across locations. A producer could use block chain’s distributed ledger technology as a global digital signature of the entire transaction, including financial payment terms and contractual terms associated with product delivery.
Blockchain can store the terms of an agreement between parties in a programmable form on the blockchain that is distributed among all nodes. It means that parties do not need to hire legal professionals to draft extended agreements with various clauses stored on paper or stored in various databases worldwide.
The ability to manage complex supply chains using blockchain technology is essentially limitless. In addition, smart contracts are for various insurance policies such as oil spills, property damage, climate change, etc. For example, suppose a party was found responsible for pollution or an oil spill that disrupted operations of downstream companies. In that case, smart contracts can have a use case to expedite claims payments and penalties.
The speed of transactions that blockchain technology can provide is also a significant benefit to the oil and gas industry. Transactional data can process millions of times faster than current manual processes.
The use of blockchain can also boost the limpidity of an oil company’s business and aid in its compliance. Smart contracts written with specific industry and legal standards could help with decisions regarding regulatory matters, human resources, environmental compliance, or even labor rights. For example, an insurer could leverage an intelligent contract for financial claims on a resource event such as an oil spill or pipeline leak.
Blockchain technology is developing rapidly, and there are many potential uses for this disruptive new find in the oil and gas industry. The cases for blockchain in oil and gas can be even more compelling to stakeholders with the benefit of smart contracts, which provide a set of terms that are written into the chain and enforce specific conditions and proof of certain events.
As the use of blockchain grows in supply chains, industries such as food, pharmaceuticals, and financial services will likely join the ranks of other industries that have already implemented this decentralized ledger technology.