LISTEN TO THE POST - Mining Crypto Downhole: Use Cases for Blockchain in Oil & Gas
In this week’s brew:
Mining Crypto Downhole: Use cases for Blockchain in Oil & Gas by Neelendra Nath
Visual Thought of the Week featuring creative by Visualize Value
Deep dive in marketing tips - a thread of threads on twitter by Victor
POST
Mining Crypto Downhole: Use Cases for Blockchain in Oil & Gas
A couple of weeks ago, I got an invitation to be a part of a panel on ‘application of blockchain in energy industry’, to share the oil & gas perspective. Now, application of blockchain in Oil & Gas isn’t really a very new discussion, nor a very hard to understand one. Initiatives withing the industry have been put in place as early as at least 2017. Yet, when you try to read up or talk to the people working in the industry, there is awfully little to show for. Five years hence, while blockchain isn’t anymore a niche technology, it’s utility in oil & gas is still being put across as a very novel approach. It shouldn’t be.
Is there a case for Blockchain in Oil & Gas?
Short answer. Certainly.
Like any other traditional large industry, oil & gas is marred with challenges which comes with large scale operations, multiple stakeholders, cross-market transactions and a huge data management. The point of inefficiencies is a lot and given the sheer scale of the industry, each can bleed billions in terms of value lost.
Over the years, fossil fuel industry has gained a somewhat ‘edge of the society’ status – it is still extremely critical for the way of life we have; yet is largely unwanted for huge footprints it leaves in terms of climate impact. Under such circumstances the pressure, from the investors, regulators and people at large, is immense on the industry to be leaner, efficient, low impact and transparent. Blockchain, as a technology, can enable all of that.
The obvious use cases leveraging Blockchain technology
There are a lot of use cases, which are obvious and have been well evaluated in other industries such as finance, logistics, shipping etc. In fact, even oil & gas have done a pilot which gave commendable results. In 2020, a OOC Oil & Gas Blockchain consortium of about ten companies, including ExxonMobil and Chevron, did a pilot which showed incredible results decreasing process workflow from 90-120 days to 7-9 days and steps required down to 7 from 16 with no manual intervention.
The fundamental of the blockchain use cases lies in knowing operative inefficiencies, reducing the costs associated with them through secured interoperability among systems of multiple stakeholders.
Automating Transactions with Simultaneous Access
A lot of invoicing and reconciliation process still requires manual intervention, especially when multiple intermediary and stakeholders are involved. By bringing transactions on blockchain, each party – sellers, buyers, financers, banks, regulators etc. – can have a single immutable record of truth simultaneously. It enables real time cash & fiscal management, frees up working contract and reduces contract leakage, even across different sovereign jurisdictions. It cuts down on time needed for process workflow by providing auto validation and ensures end to end transaction security. Each transaction stays on record with provenance available to all stakeholders and can be readily made available to any new entity by giving access to the shared ledger.
Maintaining Safety & Security Standards
Oil & Gas industry have some of the highest risk operations and activities. It needs to keep extremely high standards for sourcing, testing, licensing, training for both personnel and equipment that is used. A lot of these activities involve multiple contractors and subcontractors.
A private blockchain among the involved parties can keep a complete record of employees and contracted workers, their exposures, health risks, clearances, trainings etc. Also, a complete transparency can be brought in for maintenance and testing of safety critical equipment. Blockchain can also be used to implement project/operation/companywide security and access clearance for locations, information and data.
It can be extremely useful in reducing unsafe practices, and saves the time lost in conducting multiple verifications.
Impact Monitoring & Climate Compliance Transparency
Blockchain can be used to more effectively record events and evidence to keep track of adverse impact of the operations, steps taken to mitigate, and efforts being put in place to be compliant. The regulator can keep an almost real-time view of compliance status and raise alarms when needed.
Companies themselves can also ensure and track that all its suppliers, vendors and subcontractors are meeting the climate standards that has been set. Having a clear and traceable record of this information, can help organizations build reputation and trust for green finance.
Provenance and Traceability
Blockchain creates opportunity to build system which allows commodity tracing, end to end which ensure the provenance of every barrel. It can help reduce prevalence of unethical produce and manoeuvres against sanctions. Having a method to trace back commodity to its who source and supply route, can also help figure out the impact individual unit is creating and true differentiation between low footprint and high footprint fuel could be made.
Same holds true for all kind of asset acquisition and mobilization that happens in the industry, from land to machinery to chemicals. The ability to trace them up to their source can bring much transparency and hence trust in the industry.
These are few examples of simple use cases which have parallel in other industries reaching maturity. But in truth wherever there is need for data storage, data distribution and validation from multiple stakeholders, blockchain can be implemented and will be useful for more efficient workflow.
The not so obvious use cases for Cryptocurrency and NFTs
Yes, I am talking about that part of blockchain technology, which many just roll their eyes over. But you got to give that beyond memes and funks, there is a very real point and purpose which likes of Bitcoin can serve.
Obviously, they are not extremely popular with financial institutions and governments across the globe as they seem to be directly gunning for one thing which essentially is their complete monopoly. Money. But slowly and steadily they are opening to it. In time one would think legacy industries will also look at them for potential utility.
There are a few I can think of which can shape up eventually.
Why not mine bitcoin instead of flaring the gas?
Completely practical and already in practice with wind farms. The idea is that any energy production which is lost because of limiting factors – storage, processing etc. instead of letting go can be jacked to a mining rig and cryptocurrency such as bitcoin can be mined producing some value and reducing immediate loss.
The clear case from oil & gas is the flaring. Associated gas getting flared is a monumental waste. Onsite rigging of cryptocurrency mining unit can consumer that and create a monetizable asset and create value for the producer.
Can there be a cryptocurrency pegged against oil?
Given that oil is a scarce resource, it does make a case for an industry wide cryptocurrency pegged against the oil itself. It would eliminate the need of external intermediary for transaction among parties within the industry.
Where is NFT in all this?
It can be a bit farfetched but IP ownership, data allocation and innovation partnerships can be some use-case where a non-fungible token makes sense. For example, bulk of subsurface data stay under-analysed and under-utilised. They can be offered as NFT to crowd source analysis. It can be used to encourage research contributions, where any individual who end up making meaningful contribution, say a piece in algorithm – can own the specific contribution as an NFT.
More than a decade ago, when I graduated as a Petroleum Engineer, I started working on a solution which enabled crowdsourced research input and contribution to large company project by engineering students across universities. Needless to say, it didn’t workout. Blockchain would have been the perfect way to bring them together, NFT to own the contribution and cryptocurrency to reward them.
Blockchain, or Web3.0 is not a niche or novel technology anymore. We will soon be moving to a point where this is going to the obvious way for digital existence. Legacy industries including oil & gas has been a bit slow on adoption, and in academia there is little cross skilling that is happening. There is much value to be created and much to be saved if more experiments start happening to assess use cases.
VALUE ADD
Percolator Talent Collective
Percolator talent collective is a private community I am curating for individuals who are seeking high value high impact technology and growth roles. How it works is that you apply to the collective, and once selected; a curated set of companies reach out to you for the roles they have open.
You can chose to be listed anonymously, or make yourself invisible to a selected set of companies.
If you are in a mental space of ‘not actively seeking but open to see whats out there’, then being part of the collective can actually help you.
Percolator Job Board
If you are actively looking for a job, then we have some really interesting curated remote roles in technology and growth listed on the Percolator Job Board. You can directly apply to them.
Director, Content at Spotify (Remote - Global)
Director, Community Governance at Reddit (Remote - Global)
Senior Product Manager, Growth (SEO) at Reddit (Remote - Global)
Growth Project Manager at Pipe (Remote - Global)
Frontend Engineer at Stripe (Remote - US)
COMMUNITY
We are experimenting with communities to help our subscribers connect with each other and engage more effectively. We have set up two communities for that purpose - one on twitter and another on discord.
Twitter has recently launched community feature, and it will be interesting to try out how does using tweet within a private community works. Please join in if you want to try it out. If you do not have the feature available to you, please follow & DM me and I will try to invite you.
Discord community is more tried and tested place. It gives a lot of feature to manage and moderate discussions, have separate channels and also verified anonymity for the members.
SPONSORED
To stay updated and interesting read everyday, I am using Refind. They curate posts from many sources and send it directly to your inbox based on your selected topics. It is free to subscribe. Give it a shot and I am sure you will find something of your interest.
WEEKLY ROUNDUP
Visual Thought of the Week
A Thread of Twitter threads to up your Marketing Skills by Victor
Mining Crypto Downhole: Use Cases for Blockchain in Oil & Gas