Billion-Dollar Benefits Foreseen via Tandem Energy Blockchain-Internet of Things Tech
Nearly everywhere you turn, from banking and financial markets to commodities, logistics and retailing, it seems leading corporations are involved in one, if not more, blockchain development initiatives. The power and energy industry is no exception.
In part one of this two-part series, we reported on a white paper just published online by Vancouver-based BTL Group, a blockchain development company focused on the finance, energy and gaming industries. In it, BTL highlights the prospective benefits, as well as challenges, associated with development and implementation of blockchains in the oil and gas industry.
We continue to explore BTL’s elucidation of these issues here in part two, moving on from a focus on security (in part one) to the benefits blockchain convey for oil and gas industry players in terms of streamlining and greatly enhancing the ease and efficiency of critical business and industry functions, as well as their reliability, security and transparency.
Blockchain in the Energy Sector
Nearly 30 percent of executives at corporations with $500 million or more of reported annual revenues surveyed by Deloitte for a Dec. 2016 report said their companies had made investments of $5 million or more to come up with blockchain solutions that could automate and improve data and communications security. Furthermore, more than half said their companies would “be at a competitive disadvantage if it did not adopt blockchain technology,” BTL points out.
As Microgrid Media has been reporting, numerous blockchain development and pilot projects are under way across the global energy sector, including efforts to streamline, better secure and manage core business and industry activities, from distributed energy resources and grid assets, purchasing, logistics and supply chains to back-office processing, administration, trading and risk.
As highlighted in part one of this series, well-designed and executed implementation of blockchain platforms in the oil and gas industry holds the key to unlocking billion-dollar cost savings streams in terms of enhanced security alone, BTL asserts in its first white paper.
“The blockchain-enabled energy enterprise can be visualized today. Imagine gas pipelines, equipped with connected sensors, communicating securely and reliably with one another, autonomously updating volume, temperature, and flow pressure measurements in real-time over a platform that does not require costly central IT infrastructure to broker information,” the authors explain.
“Oil and gas companies are exploring blockchain’s promise to revamp inefficient internal processes and achieve significant reductions in operating costs through the automation of record keeping and messaging, the digitization of the supply chain information flow, and the elimination of reconciliation, among many other data management use cases.”
Streamling Processes, Realizing Cost and Efficiency Gains
BTL goes on to highlight the operating and cost efficiencies oil and gas industry players can gain by implementing blockchain solutions to automate and streamline operations with regard to both day-to-day operations and capital expenditures. Prominent among these is the opportunity to consolidate the process of reconciling data associated with transporting gas from fields to consumers. As BTL explains:
“The current process of moving gas from field to subterminal to terminal is burdened by legacy processes and labour intensive manual activities that often result in reported flow volume discrepancies between counterparties. These discrepancies necessitate a data reconciliation process that has been reported to consume multiple days per month.”
Unsurprisingly, such a lengthy process involving multiple, often widely dispersed, counterparties is prone to error and vulnerable to security threats, BTL continues. More specifically, the standard gas volume information management process entails:
- Gas nominations originating upstream sent as PDF attachments via email
- Shared inboxes, with access by several operators
- Manual entry of nomination data into gas balancing and portfolio management software
- Unaccounted for updates that lead to data discrepancies among counterparties
- Manual searches through filed PDFs to find the latest nomination updates
Reducing Errors, Removing Vulnerabilities
Blockchain applications can not only eliminate these vulnerabilities, it can eliminate the need for individual organizations to engage in reconciliation completely, according to BTL:
“Reconciliation is baked into the process of adding data to the chain. Data entry errors are eliminated, as entries inconsistent with information held by counterparties will not be validated and added to the record. Such inconsistencies will automatically be flagged for operators or volume management teams to resolve immediately. A transparent and synchronized distributed ledger provides immediate settlement and an authoritative record of gas estimates, when they were provided, and who signed off on them.”
BTL goes on to cite similar prospective results were oil and gas industry participants to implement shared blockchain solutions for back-office administration and risk management. Yet more broadly, the key attributes inherent in blockchain – immediate user authentication and verification of transactions, replication of blockchain database among all peers in a network and its “tamper-proof,” immutable – are applicable to energy trading, confirmation, invoicing, data management and messaging.
Furthermore, broad-based access to timely data spanning a significant part, if not, an entire industry value chain, opens up opportunities to employ the latest predictive analytics so as to identify and capitalize on promising patterns and trends throughout organizations and industry sectors.
Capitalizing on the Confluence of Blockchain and “Internet of Things” Tech
BTL also points to the fortuitous coincidence of emerging “Internet of Things” and blockchain technology, and the
synergy that can result when they are implemented in tandem.
“The arrival of a solution that lowers capital expenditures is timely for an industry that is on the cusp of an exponential rise in data collection, transactions, and computing requirements with the adoption of connected devices throughout the enterprise – otherwise referred to as the Internet–of–Things (IoT),” according to the white paper.
“Connected devices are proliferating throughout the world at an astounding rate. The McKinsey Global Institute projects the number of connected devices to hit 25 billion by 2020, up from 4 billion today.² Along with this astounding growth in IoT comes enormous promise, and the energy sector is among those expected to benefit most. Ubiquitous connected sensors will provide data in real-time that can be used to make enormous strides in operational efficiency.”
