Blockchain technology is reaching into various spheres and industries. Some are less susceptible to disruption and some more. But what about one of the largest industries in the world, the oil and gas industry?
According to IBISWorld, one of the leading business intelligence firms, total revenues for the oil and gas industry amounted to close to $2 trillion (2000 billion) in 2018. This sector is comprised of corporations exploring, developing and operating gas and oil fields, and with these figures they account for 2-3% of global GDP.
This figure does not include companies in the transport, refining and sales of derivatives sector, which is about 2 trillion, where at this moment we reach large percentages where this entire industry accounts for between 6-8% of global GDP, which translates directly into the vast amounts of capital that moves within these sectors.
In terms of technological innovations, they are not foreign to this industry, at least not to the operational side in the form of 3D seismic exploration and drilling. Issues occur in back-office functions such as the supply chain, procurement and all parts of the business related to finance. This aspect has largely remained untouched by innovation, which opens the door to new digital solutions, and blockchain largely fits into this story.
In a recent survey, Deloitte set a value proposition for the oil and gas industry. The first step is to decide whether blockchain will be usable for oil and gas companies. There are 4 areas that can shape the discussion and lead the main players to concrete conclusions:
- Transparency and regulation
- Security and Cyber threats
- Medium volume trading
- Smart contracts
At present, the oil and gas industry is divided into 3 major sectors that make up the complete supply chain, namely Upstream, Midstream and Downstream Enterprises. The mentioned sectors are characterized by large investments between cooperating parties and subcontractors, especially on the Upstream side. In these processes, there are frequent changes in ownership, transactions and changes in information, which is due to the inherent nature of the price movements of oil, gas and petrochemicals on the market.
These characteristics make the industry a suitable candidate for blockchain technology, especially in the areas of ownership change, cost sharing and cross-party collaboration. In addition, the entire regulatory side of this domain requires strict reporting to government bodies, which adds an additional dimension of transparency that makes blockchain technology relevant in this sector.