- Developing blockchain platform for oil & gas industry
- About 9% of crude oil transactions are disputed
- Distributed ledger technology may reduce transaction & resolution costs
There are few sectors as large as the oil and gas industry, which by one account reached 48.7 billion barrels of oil equivalent (“BOE”) in 2016 (http://nnw.fm/O3SkO). Despite the depressed prices, revenues climbed to $1,205.6 billion in 2016. West Texas Intermediate (NYMEX WTI) which was trading at over $130 per barrel in 2008 never rose above its current price of $57.75 at any time during 2016. In such a mammoth market, the supply chains crisscrossing the globe are tracked by intricate agreements that span several jurisdictions. With such size and complexity, it is inevitable that contractual disputes arise, resulting in costly reconciliation and resolution procedures. A recent study from Deloitte (http://nnw.fm/aS74k) concluded that ‘around nine percent of crude oil transactions are disputed, which equates to around USD 150 billion each year.’
However, a new Blockchain platform to be developed by Petroteq Energy Inc. (TSX.V: PQE) (OTCQX: PQEFF), in conjunction with First Bitcoin Capital Corp. (OTC: BITCF), may mitigate some of those frictions. The two companies recently announced a co-development agreement, under which they will develop a new supply chain management platform to be used in the global oil and gas industry, based on advanced Blockchain technology (http://nnw.fm/XnNV8). The new platform is appropriately named Petrobloq.
Petroteq Energy is an oil & gas company focused on the development and implementation of proprietary technologies for the environmentally safe extraction of heavy oils from oil sands, oil shale deposits and shallow oil deposits. The company has developed a unique, environmentally-safe, continuous flow, closed loop technology… a first in North America and probably in the world… that requires no tailings ponds, which contain large quantities of toxic sludge resulting from petroleum extraction. Petroteq Energy was featured in two recent Network News Wire editorials: Blockchain to Enable Frictionless Transactions(http://nnw.fm/4AeOc) and Can Blockchain Technology Revolutionize the Global Oil & Gas Industry Supply Chain (http://nnw.fm/e8chR).
Although commonly associated with cryptocurrencies, Blockchain or distributed ledger technology potentially has many other uses because of its major characteristics. Most importantly, two parties attempting to enter into a transaction will very often know nothing of each other. Consequently, they will typically rely on a trusted third party or intermediary to ensure they are fairly treated. In money transactions, the role of the trusted intermediary is usually taken by a financial institution, which naturally charges for its participation. This gives rise to transaction costs that discourage market participation and may, in some instances, distort markets unduly. However, Blockchain or distributed ledger technology employs a peer-to-peer network and so obviates the need for a ‘referee’ or trusted intermediary.
The distributed ledger aspect of the technology means that new transactions and updates are circulated to all nodes on the network simultaneously. The information in the ledger, which is more like an accounting journal rather than a ledger, is structured and encrypted in such a way that it cannot be altered without agreement by a majority of the nodes in a network (which automatically and simultaneously check the change against the ledger). A transaction is initiated by one party and validated by another using a combination of private and public keys. And since the information is distributed, the greater the number of nodes, the more secure the network becomes. Any attempt at fraud would require the corruption of the same chain in every node in a network simultaneously during the few seconds that the Blockchain is processing a change.
New information is added to the system in “blocks”, which are linked to previous blocks, hence the term “Blockchain”. This history of past transactions further establishes the accuracy and authenticity of transactions since it leaves a trail that can be audited. Thus, the technology can be used in cryptocurrencies, identity documentation, land and share registration and in verifying oil and gas contracts.
For more information, visit www.PetroteqEnergy.com
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