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The oil industry is the biggest adopter of blockchain technology

The oil industry is the biggest adopter of blockchain technology

For decades, oil industry players have used pricing models of oil and gas production to incentivize their suppliers to grow to strengthen their respective industries’ profitability.

The website provides fast deposits, withdrawals, and trading strategies to bitcoin traders. This business model has succeeded for an individual company rather than a global one.

As a result, computerized oil and gas supply chain software has been developed as a market-driven solution, with the potential for blockchain technology to provide evolutionary levels in both efficiency and security.

As a result, blockchain technology is touted as the next possible industry disruptor.
Oil and gas companies have not been immune to this excitement and have eagerly embraced many ways blockchain technology can impact the industry.

For example, enterprise resource planning (ERP) systems have incorporated blockchain-based features to enable greater visibility, traceability, automation, etc., into the industry.

As a result, it is one of the most widely recognized uses of blockchain within the oil and gas industry.

However, many oil and gas companies are looking to use blockchain technology for more specific purposes within their supply chain operations beyond ERP systems.

For example, blockchain has the potential to reduce operating costs by enabling vendors and suppliers to carry out their transactions, such as open account trade.

The global oil and gas communities are looking at specific use cases of blockchain technology to mitigate the integration challenges faced with ERP systems.

The advantages of using blockchain in supply chain management systems include reduced costs, increased transparency, less time spent on reconciliation, reduced fraud and theft risk, reduced errors in inter-organizational communication and coordination, etc.

With the global oil and gas community exploring these use cases for blockchain technology, there is a need for businesses to gain a better understanding of how it could benefit their operations.

What can the oil industry gain from blockchain?

Digitized oil products:

The oil industry is familiar with digitalization within its supply chain. Digital processes have been an integral part of the oil business for many years, such as the development and use of barcodes to track stocks and optimize deliveries.

However, the introduction of blockchain technology offers the opportunity to digitize some products within a company’s supply chains while also making operations more secure and efficient.

For example, large-scale companies like BP and Shell already have a pilot program underway where they track products via electronic tags connected to their centralized database.

In addition, other companies, including Chevron, have already narrowed down their electronic data management system to a purely electronic solution versus a hybrid solution that includes paper records.

Maintenance of equipment with blockchain:

Beyond the digitization of oil and gas products, blockchain technology has the potential to be used to track equipment throughout its entire lifecycle.

Along the same lines, this technology can track individual services performed on that equipment to maintain compliance with maintenance regulations.

For example, blockchain technology could be used by an offshore oil rig operator to log service records of their equipment and generate reports for regulators as needed.

Advanced payment system:

Blockchain technology can also be leveraged as a payment system for suppliers and vendors within a company’s supply chain.

One company that is particularly looking into blockchain-based payments is Royal Dutch Shell Oil Company, which has been exploring ways to pay suppliers and vendors in cashless transactions using blockchain since 2016.

In addition to using blockchain technology for payment purposes, tokenizing physical products and creating a digital identity for them could allow us to create a more vital link between physical goods and digital records.

Furthermore, the ability of blockchain technology to create an immutable record of digital identities for these physical products is expected to help reduce supply chain fraud and counterfeiting.

A traceable digital history:

The concept of tracking digital identities from the manufacturing process, through delivery, to utilization can be extended back to the sourcing stage.

It can enable us to maintain a complete record of the originator of a particular asset within an organization’s supply chain while also ensuring that a reputable manufacturer in compliance with industry regulations created this asset.

It can allow companies to trace the lineage of their products through the supply chain and achieve greater efficiencies in their operations.

The oil and gas industry is starting to adopt blockchain technology for its own needs. However, there are still hurdles to overcome for this technology to become a disruptor within the oil industry truly.

The main challenge regarding adoption is the general need for more awareness and understanding of blockchain technology among operational management teams.

For businesses to better understand how it could benefit them before plowing ahead with implementation, they will need all levels of their organization—principals, line managers, support staff, etc.—to be educated on the benefits it could offer them.

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