The digital ledger system called blockchain, which was created along with the invention of the digital cryptocurrency known as bitcoin, is beginning to seep into the oil and gas industry.
Blockchain is described by the Harvard Business Review as “an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way.” The system exists as a singular network, with a constantly increasing list of records that are referred to as “blocks.” After the information has been recorded, the blocks of data are unchangeable, as all information is uniformly shared among a network with timestamped transactional evidence. It was first used as a ledger tool to allow bitcoin to exist free and unregulated from any central authority, and to protect the currency from a single point of failure.
In October, the Financial Times reported that BP is beginning to experiment with blockchain. The London-based major is using it to increase efficiency in oil and gas trading, such as by cutting out middle men in the transactional process. The company already has been working with others like Eni and Wien Energie on experimental blockchain trades. BHP Billiton also has reportedly started to use the technology to keep track of things like rock and fluid samples, according to Bloomberg. Further, in a recent report by Deloitte, blockchain could be capable of not only increasing database and trading efficiency, but also improving transparency and compliance, addressing cyber threats and even improving the supply chain, through more seamless contract management.
The capabilities present interesting use cases. For example, one can imagine a world in which there existed only one digital copy of any legal document or contract, and any changes that were made were reflected instantaneously, eliminating transfer time and the possibility of losing revisions. There is also a tremendous bit of potential for automation of record-keeping in the accounting and financial world, which could eliminate human error.
“As revolutionary as it sounds, blockchain truly is a mechanism to bring everyone to the highest degree of accountability. No more missed transactions, human or machine errors, or even an exchange that was not done with the consent of the parties involved,” says Ian Khan, Tedx Speaker and author. “Above anything else, the most critical area where blockchain helps is to guarantee the validity of a transaction by recording it not only on a main register but a connected distributed system of registers, all of which are connected through a secure validation mechanism.”
At any rate, this will be an interesting trend to watch in the oil and gas industry, and something that could have far-reaching ramifications beyond energy.