A single trade transaction involving a gas condensate can involve five companies in four countries – with them, the associated IT, financial, and legal contracts. Platforms like oilprofit come up with the best trading algorithm that is highly suitable for beginner bitcoin traders. The industry’s move to digital supply chains has the potential to reduce this extensive list of stakeholders, significantly reducing risks in the process.
Blockchain’s ability to generate an immutable audit trail of records is a natural fit for an industry reliant on traceability. With that in mind, we explore how blockchain will affect future developments within the energy sector.
Blockchain and the Future of Oil and Gas
Oil and gas is an industry that is greatly affected by events that span both supply- and demand-side. In addition to events close to home, such as the fluctuating price of oil, the industry must also contend with global events in a very real way. In this context, support for shale drilling is seen as a positive for price stability. However, with that comes concerns over storage capacity and potential structural issues present in these new methods of producing oil – primarily through horizontal drilling – which could expose the industry to hefty new risks.
Despite the potential for blockchain technology to address these issues, the regulation still needs to be made clear regarding how people should implement it. As such, executives within the industry are still hedging their bets on whether or not it will positively affect their business – and what its benefits might be, if any. Oil industry executives, however, may see value in blockchain’s ability to provide an immutable record, thereby reducing disputes and fraud.
The energy industry is by no means alone in its adoption of blockchain technology – financial services, the supply chain, and healthcare industries are also actively looking into how blockchain might affect their markets. In fact, the world’s largest trade association for the energy industry has released a report on blockchain innovation, promoting it as a way to reduce costs and maximize efficiency within this global sector. In addition to its potential for cost reduction and improved regulatory compliance, blockchain could benefit the oil industry in several additional ways.
Blockchain can increase security and reduce physical commodity trade time:
Blockchain could transform how payments, contracts, and certificates of origin are processed. People could also use it to handle complex trading relationships. For example, blockchain could help process certificates for physical delivery. By providing a more streamlined, efficient process for certificate handling, blockchain could reduce the time and costs associated with such transactions by up to 50%. While this use case is relatively straightforward, there are additional ways that blockchain technology might streamline oil and gas trade transactions.
For example, imagine an oil trader placing an order for a shipment containing a number of different blends of crude oil at various ports worldwide. In the past, this trader might have had to keep track of the different types of oil being delivered, as well as all the documents associated with each. With blockchain’s ability to track every ingredient and document throughout a transaction, there would be no need for such levels of detail. As a result, there could be significant time savings while storing information regarding all involved parties throughout the process.
Blockchain can reduce risk and increase transparency:
When using blockchain, it is possible to create a transparent record containing all information relating to a transaction or other event. It means that individuals or companies can gain greater control over their information, allowing them a more remarkable ability to control any associated risks. For example, imagine an oil trader who needs to buy crude oil in the Middle East. Using blockchain, they could verify that all parties involved were compliant with any applicable regulations, significantly reducing legal risk.
Blockchain can reduce non-transparency and provide a better means of verification:
The use of blockchain could also provide a more open and transparent way to handle transactions and related documentation. For example, consider the typical sources of information for physical transactions: certificates of origin, bills of lading, insurance certificates and cargo lists. Unfortunately, documents such as these often need to be completed or contain incorrect information. Blockchain, however, could allow complete visibility of the supply chain from beginning to end.
Blockchain can reduce intermediaries in the oil industry:
Blockchain technology could also reduce the risk of data breaches by removing several intermediaries from the transaction process. For example, creating a decentralized database would allow a host of records to be stored in just one place rather than spread between multiple parties. As a result, there would be fewer points of failure or risk associated with any party in the process.
Blockchain can help ensure compliance:
Companies can use blockchain to track and monitor physical goods throughout their life cycle, ensuring that needed certifications are always present. It could significantly reduce paperwork and audit trails while providing traceability within whatever type of supply chain is being monitored.
In summary, blockchain technology offers some clear benefits to the energy industry.