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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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Saudis Rush Ahead In Blockchain Race

Saudi Arabia is apparently eager to adopt blockchain technology in its oil industry “and that’s huge,” according to one of the earliest blockchain developers Nick Spanos. Speaking to Bitcoin magazine, Spanos was quite general in his remarks, saying how everyone in the Kingdom was enthusiastic about blockchain as a whole and couldn’t wait to start using it.

Earlier this month, Saudi Arabia held the first blockchain-focused event in Riyadh, Decoding Blockchain KSA. Spanos went on stage together with Aramco representatives, who said that the company was trying out different use cases for blockchain, as quoted by Sputnik. The company officials also said blockchain will soon play “a huge role” in the Kingdom’s energy industry.

Now, Spanos is co-founder of Zap.org, a platform that powers EnergyLedger, a supply management and smart contracts application specially developed for the oil industry. Basically, the app involves large-scale automation, tracking of every barrel produced through smart contracts, and securing payments. Spanos’ enthusiastic remarks suggest that Aramco may be interested in using this particular solution to go smart and automatic.

If this is indeed the case, it is only a matter of time until rivals come along. After all, Aramco is the biggest oil company in the world, and despite the Kingdom’s tight finances, it seems that Riyadh is ready to spend on anything that has an air of reform, change, or transformation around it. The Vision 2030 drive is still strong, and the oil industry is an obvious top priority for a reform that will make it more competitive: it accounts for more than 40 percent of Saudi Arabia’s GDP, after all.

This is not Saudi Arabia’s first brush with blockchain. The Kingdom is already testing the tech in financial services—a natural early adopter of the technology. The oil industry, on the other hand, is a slow adopter of anything new—even something as promising as blockchain.

Promising it is, but the very fact blockchain is something new and unfamiliar—and impossible to grasp for a lot of non-experts—is making its advance into oil and gas slow, especially in the United States. Perhaps Saudi Arabia’s apparent eagerness to adopt blockchain for oil is an attempt to get an edge over one of its main competitors.

Yet there are U.S. blockchain solutions developers targeting the oil industry specifically, using the momentum created by the digitization of various processes in the industry amid the cost-cutting drive caused by the 2014 price slump. U.S. oil and gas won’t take too long to respond to this new offering despite its inherent conservatism and regulatory concerns.

So, Saudi Arabia is right to be in a rush: adopting blockchain for the energy industry will cut thousands of jobs, which would be bad news for the people currently working in these jobs but good news for Aramco, which willy-nilly had to follow the cost-cutting trend if only to acquire a more modern look ahead of its long-anticipated initial public offering.

Of course, for now it’s all just talk, and it will be a while before we hear or see something more substantial. But judging by the Kingdom’s eagerness to diversify—supported by contracts, not just talk—the chances are that blockchain is another item to tick on its reform agenda that should make its biggest industry more competitive.

By Irina Slav for Oilprice.com

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