The oil and gas business is a vital component of modern society, particularly in light of the increasing worldwide demand for energy. Even still, this industry’s management techniques—which are fraught with inefficiencies and excessive expenses—remain antiquated despite its continued prosperity.
The Growing Importance of Natural Gas and Oil Resources
Global economic and social advancement are largely dependent on oil and gas resources, which are being used at an unprecedented rate. In June 2018, the “BP Statistical Review of World Energy” was published. It states that natural gas and oil together make up a significant 57% of the world’s energy consumption. This astounding hydrocarbon usage emphasises how essential hydrocarbons are to supplying the world’s energy needs.
Furthermore, data from recent years indicates that the world’s oil consumption has been rising, surpassing an average growth rate of 1.2% for three years in a row. Not only has natural gas consumption increased by 96 billion cubic metres, but it has also grown at its quickest rate since 2010.
According to forecasts from the “BP Energy Outlook 2019 edition,” even with continuous efforts to support the development of new and renewable energy sources, oil and gas will still account for a substantial 50% of global energy consumption by 2040.
Specifically, the liquified natural gas (LNG) market is expected to grow significantly, accounting for 15% of the world’s natural gas consumption by 2040. As such, for the foreseeable future, oil and natural gas are expected to continue to dominate the world energy market.
The Oil and Gas Industry Needs Modernization
Although the world’s ability to produce energy depends heavily on oil and gas resources, the oil and gas sector itself is facing significant challenges. The industry’s management procedures are still firmly rooted in antiquated, frequently ineffective techniques, despite advancements in science and technology. The industry’s operational mode, which is typified by exorbitant expenditures, extended project delays, and heightened risks, is ready for change.
Upstream, midstream, and downstream are the three main sectors that make up the oil and gas business. While the midstream sector handles the movement of gas and oil, the upstream sector concentrates on exploration and development. Finally, sales and storage activities are included in the downstream sector.
Rapid technical developments have occurred in the oil and gas business in recent years, especially in areas like intelligent drilling technology, intelligent oil and gas fields, and marine digital platforms.
These changes highlight how the sector is gradually becoming more automated, digitised, and intellectualised. But the industry’s management procedures have fallen behind, with antiquated techniques that stifle productivity and drive up expenses.
Blockchain’s Importance for the Oil and Gas Sector
In the face of these management obstacles, blockchain technology appears to be a viable remedy for the oil and gas sector.
Since its initial emergence in 2008 thanks to Bitcoin, blockchain technology has undergone three distinct eras of development: the blockchain 1.0 era, which is typified by Bitcoin; the blockchain 2.0 era, which is characterised by Ethereum and smart contracts; and the blockchain 3.0 era, which is concentrated on broader applications in the social sphere.
Although blockchain technology has found applications across various industries, the oil and gas sector initially adopted a cautious approach. It wasn’t until 2017 that British Petroleum (BP) initiated blockchain testing, marking the industry’s first steps towards embracing this transformative technology.
Blockchain in the Gas and Oil Sector
Important Management Concerns in the Gas and Oil Sector
Even though the oil and gas sector is essential to supplying the world’s energy needs, it faces a number of managerial obstacles that reduce productivity, drive up expenses, and raise risks. Among the well-known problems are:
1.Ample Paperwork and Reconciliation: Due to the industry’s complexity, there is a great deal of paperwork and reconciliation work, which raises the time and money expenses of transactions.
2.High Transaction Risks and Multi-Party Transactions: Operations in the oil and gas sector frequently involve several parties, which raises the risk of fraud, mistakes, and inefficiencies in transactions.
3.Third-Party Management expenses: The industry has difficulties due to high third-party management expenses, ineffective trade negotiation procedures, and delayed data sharing.
4.Cybersecurity concerns: The industry’s reliance on digital systems makes it susceptible to cyberattacks, putting critical data at risk.
Blockchain’s Potential to Help with LNG Industry Issues
The oil and gas industry’s management problems may have a promising solution in blockchain technology.
Transparency, security, and decentralization—three of its fundamental characteristics—offer special benefits for optimising business processes. The numerous ways that blockchain technology can simplify the liquid natural gas sector are listed below:
1.Transaction Efficiency and Smart Contracts: By implementing smart contracts on blockchain, a great deal of paperwork can be eliminated, procedures may be made simpler, and overall expenses can be decreased. To avoid weaknesses, smart contract security and design must be well thought out.
2.Transparency and Lower Fraud Risk: All participants to a transaction may access real-time and historical data thanks to blockchain’s transparent ledger architecture, which lowers the risk of fraud and increases transaction success.
3.Cross-Border Payments: Blockchain-based cryptocurrencies like Bitcoin and Ether can lower cross-border payment costs, expedite fund verification and settlement, and improve transaction efficiency in the global oil and gas trade.
4.Supply Chain Transparency: By guaranteeing the integrity of goods and assets throughout their existence, blockchain’s tracking capabilities can be used to improve supply chain transparency.
5.Compliance and Regulatory Alignment: Blockchain’s transparency lowers the cost and speeds up compliance with laws and regulations such as the Dodd-Frank Act, the Extractive Industries Transparency Initiative, and European Union directives.
In conclusion, the liquefied natural gas (LNG) production industry has great potential when it comes to blockchain technology. It is indisputable that it has the ability to improve LNG operations’ security, transparency, and economy.
But there are issues that need to be resolved, such scalability and network security. However, these challenges are surmountable with continued progress and the dedication of industry leaders. The oil and gas industry is in dire need of modernization, and blockchain technology fits the bill by bringing greater transparency and lowering costs.
The road to a modernised oil and gas business, particularly in LNG production, is becoming more and more apparent as blockchain use picks up steam and collaboration blossoms. It represents a time that is defined by security, efficiency, and forward-thinking methods.