I need a market overview of use cases of blockchain in oil and gas
Hello and thank you for using Wonder for your question about the application of blockchain technology within the Oil and Gas Industry.
In short, the Oil and Gas Industry is experimenting with various applications of the blockchain in transactions, Internet of Things, and a more efficient, secure business process. While the general vibe around the technology is positive, and its market is expected to grow significantly, the biggest challenges are with computational power and the context of legal policies like taxation.
Please find a summary of our methodology and our results below.
During our research, we consulted with trusted media websites and industry articles. We will provide insights through a list of the articles we deemed relevant.
After a lengthy search, we couldn't identify or triangulate an accurate size for the Blockchain market within the Oil and Gas Industry, but we were able to triangulate an estimate for CAGR.
Please note that some of the information presented in our articles might overlap with the sources listed in the request. The relationship between Blockchain and the Oil and Gas Industry is still in its infancy, and most sources have the same information on the topic.
1. BP Experiments with blockchain
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According to the Financial Times, "BP has been working with Eni, the Italian oil major, and Wien Energie of Austria on a pilot program where blockchain trades have been run on an experimental basis, in parallel with live trading systems."
"Oil and gas trading was just one of many potential applications for blockchain across BP, externally and within the organization using traditional currencies rather than cryptocurrencies."
David Eyton, head of technology at BP notes the advantages of blockchain when talking about the various intertwined sections of the organization:
"A large company like BP has to manage financial settlements and reconciliation between different parts of the business. A lot of that lends itself to blockchain."
For BP, using blockchain could reduce risk, protect against cyber threats, and lead to significant cost savings and increased efficiency.
2. Blockchain technology could extend to oil and gas transportation
The Bizjournals article explains how Oil companies — usually slow adopters of digital innovations — are actively looking into ways of using blockchain in their business.
Most of the benefits are related to efficiency and security.
One advantage the article mentions is that combining Internet of Things and blockchain could lessen the possibility of hacking without losing the benefit of tracking resources all the way to the end users.
The other major advantage is increased transparency and efficiency for transactions, as blockchain can function as a "distributed ledger."
3. Blockchain for oil and gas: a game-changer for black gold?
The Oil and Gas IQ article explains further applications of blockchain in the industry:
"Data contained in a blockchain can be shared with regulators in real-time to maximize visibility and eliminate the fines meted out for non-compliance. "
"Collaborative interactions can also be improved through blockchain. Joint venture partnerships, which may involve several companies collaborating on the same project, are common within the oil and gas marketplace."
According to the article, "financial services company R Fintech has recently launched a digital currency that derives its value directly from oil. Bilur is a cryptocurrency whose value is calculated daily based on the value of one ton (~6.5 barrels) of Brent crude oil."
4. Blockchain technology — the hype and the hope
The article by the Oil&Gas Financial Journal explains multiple potential advantages and some challenges of using blockchain. Many of the positives are related to transparency, security, and eliminating intermediaries:
"Blockchain will lead to a crude oil producer selling its production directly to a refiner without any intermediaries and never knowing who the buyer is."
"A power plant will purchase natural gas without engaging a wholesale gas marketing company. The power plant simply purchases directly from the natural gas producer, but they never know from whom or where it is coming."
"A power producer selling power directly to a consumer without an independent system operator, retail marketer, or utility. A midstream company [would be] managing multiple interstate pipeline interests without teams of schedulers. All of the scheduling is handled by a highly streamlined, ultra-efficient system where transactions are recorded on a single, trusted ledger that is shared with all parties to the transaction and which provides real-time information and contingencies."
The article also sheds some light on potential challenges and obstacles:
"The significant computing power required for networks is getting attention from environmental groups concerned about a large carbon footprint. Blockchain markets will also have to develop policies, procedures, and controls for compliance with financial crime regulations, such Anti-Money Laundering rules and Know Your Customer procedures. In addition, since transactions can largely be anonymous, significant tax issues could arise from the global nature of these transaction marketplaces."
5. Mercuria sees oil sector going digital with blockchain
Reuters article about the probable adoption and impact of Blockchain. According to Marco Dunand, chief executive of Mercuria, "the Brent market that helps to set the global benchmark price for oil could be making regular use of blockchain payment technology."
The article goes on to state that the "adoption of Blockchain in this market could reduce costs on payments by 30%."
6. The first ever blockchain solution for the US crude oil market
Energy Digital article about a ledger "built on the Linux Foundation open source Hyperledger Fabric, [which] allows major steps in a crude oil transaction to be digitized on the blockchain, ensuring improved transparency, enhanced security, and optimized efficiency." The software is a collaboration between Natixis, IBM, and Trafigura.
The system is expected to greatly improve efficiency, visibility, and transparency while lowering costs and potential for cybercrime.
7. BLOCKCHAIN PILOT FOR A LEADING OIL AND GAS FIRM: A LEARNING JOURNEY
A case study by company Fintricity where they were asked to "build a blockchain pilot for supplier bank guarantees. The objective was to facilitate a practical learning experience for all stakeholders to better understand the technology, organisational and process impacts of blockchain. The project ran over a 5-week period."
Of the many results listed in the case study, the Operational benefits stand out:
"Successful delivery of a live blockchain pilot that reduced process complexity by an estimated 80% and decreased digital contract production time from between 3-5 days down to a few minutes."
8. Blockchain Market to Grow at a CAGR of 61.5% by 2021
According to a report referenced by PR Newswire, "the Blockchain market size is expected to grow from USD 210.2 Million in 2016 to USD 2,312.5 Million by 2021, at a Compound Annual Growth Rate (CAGR) of 61.5% during the forecast period."
Also according to the article, "payments application holds the largest share of the Blockchain market in 2016."
According to our analysis and the majority of our sources, primary adoption of blockchain within the Oil and Gas Industry is for transactions and payments.
Since transaction and payments are the general drivers behind blockchain, we conclude that — based on data presented by PR Newswire -, the CAGR for the Blockchain market within the Oil and Gas Industry is expected to be around the same as the overall Blockchain CAGR of 61.5%.
To sum it up, the Oil and Gas Industry is experimenting with various applications of the blockchain in transactions, Internet of Things, and a more efficient, secure business process. While the general vibe around the technology is positive, and the market is expected to grow significantly, challenges remain for computational power and the context of legal policies like taxation.
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