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Felicity Bradstock

Felicity Bradstock

Felicity Bradstock is a freelance writer specialising in Energy and Finance. She has a Master’s in International Development from the University of Birmingham, UK.

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Another Oil Giant Joins The Blockchain Bandwagon

As oil majors rally from last year’s dip in demand and price, most are looking for new technologies to ensure the safety of their future. Driving down costs and enhancing green practices is at the top of these companies’ priority list going into the next decade, and blockchain is offering them a way to do this.  The latest company to buy into blockchain technology is Norwegian firm Equinor. Equinor is 70 percent owned by the government, meaning oil production must go hand in hand with environmental policy. To this end, CEO Anders Opedal aims to make Equinor carbon-friendly, the first “net-zero” oil company by 2050

Johan Sverdrup, Equinor’s new 300-foot-tall platform, incorporates cutting-edge blockchain technology, installed with sensors that track the drilling of new wells, the quantity of oil being produced, and many other core functions. The information is all being transmitted to a startup based in Houston, Data Gumbo, which compiles this vital information into its blockchain ledger GumboNet. 

We are seeing more and more oil tech startups emerging in Houston, putting it at the forefront of the digital revolution of gas and oil. In 2020, many companies invested heavily in new technologies and digitalization as a means of modernizing to ensure cost-cuts and more efficient practices in the future. 

Instead of relying on human input, monitoring, and evaluation to manage contracts with suppliers, the blockchain system allows for the use of ‘smart contracts’. The technology will indicate when suppliers have fulfilled their contracted work commitment, ensuring the work is being carried out as planned. It can also manage payment with digital currencies. 

Following a pilot project in 2019, Equinor decided to invest $6 million in Data Gumbo, and expects to roll out its technology across 10 other projects following the initial success of Johan Sverdrup. To date, Equinor estimates savings of $20 million in its first year of operations. 

Interest in blockchain technology grew in 2020, as several companies looked to adapt their practices to the digital era. The OOC Oil & Gas Blockchain Consortium, consisting of

10 companies including ConocoPhillips, Equinor, Exxon Mobil Corp, Repsol, and Royal Dutch Shell, tested Data Gumbo’s ability to automate payments for oilfield water-handling.

Companies found that the use of blockchain reduced the workflow process from 90-120 days to one to seven days by cutting nine steps. Other companies are expected to follow in Equinor’s footsteps after the success of the pilot scheme made it clear that companies can save both time and money using this technology. 

Shell has already pledged to become an early adopter of blockchain technology to establish trust and security among others in the sector. Shell believes using blockchain to track equipment, parts and products will enable it to manage its supply chain better. 

Related: A Glimmer Of Hope For Oil Markets

In addition to aiding supply chain management, supplier payment, and data security, blockchain can also monitor and evaluate carbon emissions. Instead of some of the current methods of estimation, blockchain technology can accurately evaluate the carbon footprint of an oilfield project. 

The accuracy provided by blockchain could, therefore, allow for better certification processes going forward, as regulators push for stricter standards when it comes to carbon emissions. Moreover, understanding the current carbon footprint of a project will allow companies to be more transparent and work towards better environmental practices. 

Seeing the clear success of Equinor’s first blockchain project, 2021 could be the year when several oil majors follow suit. After a decade of slow progress in this area, companies are finally starting to pick up the pace when it comes to digitalization, with blockchain offering a means of cutting costs, improving efficiency, and cutting carbon emissions. 

By Felicity Bradstock for Oilprice.com

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