The relationships in the global trade of the oil and gas industry depend on information sharing by all stakeholders at all stages of the process, with transparency at the forefront. Create a free account here for a costless bitcoin trading venture, the platform charges zero commission on both profitable and non-profitable trades. Blockchain technology can fit perfectly into this picture and provides a great opportunity for future adoption.
Using blockchain technology, oil companies will gain valuable insights such as improving media visibility, increased return on investment, improved operational productivity and efficiency, reduced operational costs, and enhanced supply chain traceability. The below-mentioned portion will discuss blockchain’s benefits in oil and gas supply chain relationships.
During the past decade, oil and gas companies have invested heavily in information systems to streamline their processes. Traditional IT solutions such as ERP (Enterprise Resource Planning) systems allow for better data analysis and business performance.
Even though these new information systems are vital to the company’s success, there is still much room for improvement in how companies analyze and report their data. Blockchain technology can bring transparency and accuracy to these practices by introducing a decentralized database infrastructure that anyone within or outside an organization can use. Let’s discuss the benefits of blockchain in the oil and gas industry.
Contract execution:
The oil and gas industry desperately needs to improve operations efficiency. Blockchain can minimize operational costs, ensure better trade compliance and improve the reliability of contract execution. It is estimated that up to 40% of all contract disputes happen because of the lack of reliable information at the contract execution stages.
Blockchain would be a great solution for this problem since it has no central authority or storage location; therefore, losing data is impossible. In addition, any changes made will be recorded by users in the blockchain for all companies to view. It helps eliminate disputes and risks associated with incorrect execution contracts by ensuring that all parties are on the same page from beginning to end, which helps minimize operational risks.
Cost reduction and visibility:
Once the blockchain has been deployed throughout the supply chain, it will be able to record all data/information/contract execution details in a single place. This transparency can bring great cost benefits due to improved visibility on a worldwide scale. As mentioned earlier, there is a lot of room for improvement on the information sharing and analysis front in the oil and gas industry. The use of blockchain technology would enable companies to share their operation data and help their customers by providing real-time information that everyone can access and understand.
Sensor-enabled invoicing:
For oil and gas companies, invoice payment is a significant issue. Due to technical issues and data discrepancies, companies are unable to execute the invoices. Recently oil and gas companies were spending between 5-15% of their sales by applying manual processes, which caused delays in cash flow.
The goal here is to address how supply chain partners can work together to manage their payments better. Ideally, blockchain technology can help with this by introducing a new way of collecting data, which will help eliminate inaccuracies in invoice payment ledgers.
The use of smart contracts:
With the new technology, the oil and gas industry will not only be able to eliminate manual processes but also help optimize how transactions (including payments) are conducted. With blockchain, companies can automate transactions with smart contracts, self-executing contracts that allow for customized payout options.
It is precious in the oil and gas industry, where multiple parties may be involved in a single contract, such as joint venture partners or sub-vendors. These parties may have different payment requirements to ensure they receive a payment within a certain period.
Better product management in supply chains:
The oil and gas industry takes over 100 companies to deliver and refine a single product. It presents a problem since there is no single source for product information. With blockchain technology, companies can create a more transparent product management process by tracking the movement of the products from their origin to final delivery. It helps improve supply chain management and determine whether the product is indeed safe or not. The following example will demonstrate how using blockchain in the supply chain of the oil and gas industry can help change business practices.
Oil & gas: A perfect application
In terms of adoption and implementation, an ideal candidate for Blockchain technology in Oil & Gas would be an international oil corporation (IOC). The industry is highly complex, from oil exploration and production to distribution and marketing, with many parties involved. While the supply chain is hugely complicated, blockchain technology offers a straightforward solution to track products and payments throughout the process.
Since every player in this industry has its own proprietary data management system, blockchain can help by combining all of them into one shared database. Now let’s take an example of this oil corporation and understand how it would help it optimize business practices. The abovementioned portion indicates how blockchain technology can record data from start to finish, including exploration, production, shipment, and payments that the companies may process.