Basic Concept of Blockchain
Blockchain definition in different works of literature is not entirely uniform, but the main concept on which everyone can agree is that Blockchain is a specific type of database that stores information in groups (Also known as Blocks), each group has a certain storage capacity and when filled it is automatically chained to the previously filled group to form a chain of data, and this is what we call a “Blockchain”.
The primary use of this technology was as a distributed ledger for cryptocurrencies before its integration into many areas and now it shows great promise across a wide range of business applications like Banking, Healthcare, and Finance.
Transactions begin with creating a block where the data is stored, and each block is verified by thousands or even millions of computers distributed around the net before adding that block to a chain creating a unique record with a unique history that makes falsifying the records impossible. The biggest innovation of Blockchain technology and one of its main features is decentralization, it is not owned by any single entity so data is distributed to all the participants the reason why Blockchain has gained so much admiration among the users.
Blockchain applications in the Oil industry
According to the BP Statistical Review of World Energy released in June 2018 by BP, oil and natural gas account for 57% of total energy consumption making these resources play an essential role in the energy field and oil companies are challenged to satisfy the global consumption that is constantly increasing.
Due to the orientation towards the direction of intellectualization, digitalization, and automation oil and gas technologies have developed rapidly in recent years, going from small intelligent equipment to fully automated and digitalized oilfields and platforms. However, the old management model does not adapt to these improving technologies making working with it costly, time-consuming, and risky. Based on the above problems, it’s time for the oil and gas industry to find new solutions to fix management shortcomings.
As many industries started to adopt the Blockchain technology in their different businesses, the oil and gas industry has been holding a wait-and-see attitude and rarely involved until 2017 when British Petroleum (BP) decided to take the first step by testing the Blockchain project which marked the introduction of this technology to the oil and gas industry and energy field.
Blockchain has great potential in different aspects of the oil and gas industry mainly in trading, regulatory, database management, and cybersecurity.
The Oil and gas markets involve a large number of transactions and contracts along the three different phases of the industry chain, the application of Blockchain technology in oil and gas trading mainly includes smart contracts and transactions.
Blockchain-based trading systems can help oil companies cut the transaction time of trades, has real-time access to trade documents and shipment status, and automate the execution of transactions by signing a smart contract.
Oil and gas industry is a well-regulated industry, whether it’s state or federal regulations or a company’s regulatory compliance system or a joint operating agreement. Complying with these regulations takes a lot of time, so using Blockchain to share the data will help reduce the time spent on achieving compliance. For example, joint operating agreements can be hosted in a Blockchain platform which will translate to greater transparency and efficiency.
As we mentioned before, Blockchain is a specific type of data different from traditional databases. It consists of several decentralized nodes that participate in the administration, they can verify additions and add new data to the Blockchain, but for an addition to be made each node must reach a consensus that guarantees the network security, making it difficult to tamper with. Blockchain can provide a platform to keep the data linked, and can be smoothly shared between the participants.
Blockchain databases are used generally in legacy wells to track their history and hence they can be better optimized.
Statistics show that, in 2016, nearly three-quarters of oil companies in the US experienced at least one cyber-attack, hackers assume that oil and gas companies have many vulnerable breakthroughs. If companies use Blockchain to store important data in a distributed manner the risk of a network can be effectively reduced through the consensus mechanisms.
As a conclusion, Blockchain technology has great potential in the oil and gas industry, and since it has just started in the last few years there are many opportunities, challenges, and risks, but we’ll certainly see a different industry in the future with the implementation of the Blockchain technology.