The oil and gas industry operates in regions across the globe: upstream, midstream, and downstream, making the supply chain relationship complex. Supply chains also rely highly on third-party companies to provide services ranging from exploration and production to refining, transportation, and distribution.You can start your trading career at http://bitalphaai.de.
Blockchain technology has been heralded as a way for organizations to digitize supply chain relationships. It can address current challenges in the oil and gas industry of trust by providing an immutable audit trail that supports transparency across the supply chain network. Blockchain is attractive because it allows for peer-to-peer transactions without requiring a central authority or broker whose role would be to reconcile records among participants in the network.
Blockchain is also attractive because it can be a cost-cutter to an industry desperate to lower its costs. For example, blockchain can help organizations realize mining efficiencies in their data centres, saving them resources and expenses in the oil and gas industry. It can also eliminate the need for go-betweens in the supply chain by allowing direct interactions between sellers and buyers.
But what will it take to make blockchain technology work in the oil and gas industry? First, companies need to decide whether they want private or public blockchains. The private blockchain is suitable for organizations with confidentiality requirements; it encrypts the data and uses cryptographic keys to ensure its integrity. Let’s discuss how blockchain integration in the oil and gas industry will go.
Blockchain will Increase transaction visibility in the oil and gas industry:
Blockchain increases transaction visibility because it records all the individual interactions of all counterparties at every stage of the contract lifecycle. In addition, the blockchain data are permanent, meaning all transactions are no longer subject to revision or dispute.
Blockchain can record and verify transactions at virtually any scale between two parties within a peer-to-peer distributed network. These transactions can be read in real-time by anyone with access to the network, even if they do not have permission. For example, real-time transactions are recorded and verified in the oil and gas industry.
All blockchain transactions are immutable by nature. The cost of altering any single transaction within a chain of digital records is prohibitively high. So, even if hackers were able to penetrate an operational blockchain network, it would be difficult for them to alter these records undetected. Given how its transactions are executed, the oil and gas industry has the potential for some strong use cases for blockchain technology.
Reduce cash cycle time in the oil and gas industry:
The energy sector is notorious for cash-cycle time and working capital shortages. It is because its natural resource assets move through a supply chain quickly, taking advantage of their value only after they are extracted, processed, and sold. This oil and gas industry-specific challenge is compounded by a global marketplace that requires transactions to be in the same currency across the globe.
Using blockchain technology in the oil and gas industry can reduce the time it takes to settle transactions because you do not need to wait on third-party payment platforms to confirm a transaction before it can be recorded in your database. With blockchain, transactions are instantly added at each stage of their lifecycle, reducing their cash cycle time.
Reduce overhead and number of cost intermediates:
With blockchain, you no longer need to engage in transactions with intermediaries who take a cut of each transaction. Above all, the oil and gas industry is a large-scale global operation. It means that a supply chain manager can manage end-to-end operations at scale with just a few people managing the entire network of organizational relationships.
Using blockchain technology in the oil and gas industry, the supply chain manager only needs to manage one network and not operate on five networks simultaneously. This efficiency boosts operational efficiencies regarding transaction costs and overhead associated with managing multiple networks.
Reduce capital investment for third-party vendors:
Blockchain reduces capital investment by eliminating the need for third parties involved in settlement management. As a result, you don’t need to keep paying third-party vendors to settle transactions, and you can use the money saved in other areas instead.
Blockchain imposes transparency on the oil and gas industry because it gives organizations unequivocal visibility of all transactions they have with counterparties. Transparency also eliminates the risk of double spending, reducing fraud risk and allowing for more excellent capabilities. In addition, this transparency enhances reputation management and gives organizations valuable insights into market share and pricing power.
Benefits from real-time auditing:
Blockchain technology in the oil and gas industry can benefit from real-time auditing. The technology allows you to verify transactions within seconds of them taking place. It means that you will be able to react quickly if a counterparty is no longer operating in good faith. For example, if your counterparty is late making payments and has not paid any penalties for it, then a quick audit on the blockchain will alert you to this activity.