How Blockchain Is Set Impact The Downstream Oil Industry (2021 Update)
The global blockchain market size is expected to grow in the coming years, reaching over almost $18 billion USD by 2024, as many industries prepare to make use of this new technology. From Banking to Agriculture, it is claimed that Blockchain can bring significant improvements to problematic areas such as supply chain management and compliance.
Today, we take a look at how Blockchain is set to impact the downstream oil industry specifically, and which companies are using or plan to use this new technology in the future.
Firstly, what is Blockchain? Blockchain is the technology that underpins digital currency, known as Cryptocurrency (i.e Bitcoin, Ethereum etc). A cryptocurrency is a digital coin that runs on a blockchain. This blockchain is a public digital ledger – a growing list of records (called blocks) – which allows the cryptocurrency to be distributed.
An owner of a crypto coin has a private password (known as a complex key) that corresponds to an address on the blockchain – which confirms their ownership. Since each crypto coin is a single piece of data that cannot be altered, it can only have one owner at one time – thus it stops the currency from being open to counterfeit since it cannot be copied.
How can blockchain be used in the downstream oil industry?
From the downstream oil industry perspective, this brings a lot of opportunities to improve efficiency and reduce costs of running operations.
Increased supply chain visibility
The complex nature of downstream operations can often result in discrepancies between supply chain data. Currently, the data is stored and often manually updated across various groups and operations, which leads to discrepancies and incomplete information. This can pose a serious threat to businesses, not only commercially but also from a liability point of view.
Blockchain has the potential to resolve this issue by creating a shared ledger where all supply chain information is stored, making data management easier and full transparency much more achievable. Contracts and restrictions could be integrated within this ledger to ensure only relevant data is shared with specific companies, to avoid people having access to other stakeholders information. The result is a blockchain-based ecosystem that covers the entire transaction process from start to finish.
Combat counterfeiting with improved quality control
From diesel additives to lubricants, the industry currently faces a number of products at potential risk from counterfeiting. The complex supply chain operation mentioned above not only leaves itself open to counterfeit but also to honest human error, leading to refined products potentially being sold for a higher value than they’re really worth.
By digitising the process, product batch numbers could be given specific Blockchain-based records, thus improving visibility on product quality and true specification.
Reduced losses from recalls
Another positive of giving product batches their own Blockchain record is that, in the unfortunate event of a product recall, companies would have visibility on exactly which products have been affected. This would help companies avoid having to ‘over-recall’ goods in order to capture the affected products – which usually results in huge financial losses.
Enforcement of environmental regulations
Having a blockchain system in place would help governing bodies to regulate maritime fuel operations since the accessible blockchain records would give clear visibility on product quality, origins and transportation.
Improved equipment safety
As it is with many processes in the industry, recording and collating data on equipment is still a very manual process. Blockchain could therefore have a profound impact on improving the safety of on-site workers since it could provide easy access to the recent history of equipment – allowing workers to more easily predict and prevent potential safety hazards.
Which companies are currently using blockchain?
Whilst blockchain technology is still new, many companies have already started making plans to onboard the tech into their operations.
BP, Shell, Equinor and other key players in the energy industry have worked together to develop the blockchain-based platform ‘VAKT’ with the aim of revolutionising the commodities market. The platform, which went live in 2018, it helps to automate post-trade processes in order to help reduce the risk of errors and improve overall efficiency.
Spanish energy company Repsol announced this year that they’ve partnered with bank BBVA to develop blockchain corporate finance solutions.
BHP Billiton have stated that they currently use blockchain to document resource samples – which has replaced emails and spreadsheets for a single ledger.
Is blockchain here to stay?
As companies in the energy sector begin to invest heavily in blockchain technology, it is clear that this new tech is not going away and is set to impact the industry significantly. With benefits such as streamlining supply chain management and reducing costs, it’s likely we will continue to see blockchain use grow in the industry.
Thanks for reading. We will be updating this article with the latest developments in Blockchain for the downstream oil industry – so keep an eye out for further updates. In the meantime, find more insights on our blog.