There’s a lot of buzz about blockchain these days, especially after the recent Davos conference, where world business leaders talked about the technology’s potential to revolutionize industrial processes.
However, the global buzz has not really spilled over into the oil business yet. We are using AlphaSense to keep abreast of the O&G industry’s digitalization push, and we recently ran the “blockchain” search, pictured below, in the universe we monitor (U.S. oil and oilfield service companies with a market cap over $500M).
Yep, you are reading this correctly… blockchain registers a big fat goose egg in the discourse of prominent U.S. oil companies. When we expanded our search to include international firms, some of the major oil companies show up with references to the concept, but we still only find 13 documents with a blockchain reference in the comprehensive AlphaSense database of transcripts, press releases, presentations and public filings.
Why is this concept getting no traction with oil executives?
Well… the oil industry is notoriously slow to adopt new technologies, but you don’t have to take my word for it. I found this great quote from a Shell executive in an AlphaSense transcript recently, and it really resonated with me, because I’ve heard the same thing in dozens of conversations with my own industry contacts over the years:
“Our industry is indeed behind a number of other industries in the application of digital technology, which is in a way a bit strange, given the fantastic technology capabilities our industry has.”
Although the Shell executive admitted the oil business has an adoption problem, he also intimated that Shell is working to change that. He went on to say:
“Digitalization often starts with data… Shell has 100 [petabytes] of data and someone was telling me yesterday that… 1 petabyte of data is the same as 20 million, 4-drawer filing cabinets of figures, text, data. And, so we’ve got 100 of those, so it’s a tremendous amount of information. And we are just scraping the surface at having that available to us in a way that we can provide real-time deep insights. But it’s going to be a multibillion-dollar impact on Shell…”
A multi-billion dollar impact would be huge, even for Shell which turned a $13B profit last year. And Shell isn’t the only oil company working on digitalization.
When we expand our digital terminology search on AlphaSense to include other new tech buzzwords beyond “blockchain,” the hits start to come in fast and heavy. Check out these results which show the industry isn’t entirely stuck in the stone age even though “blockchain” isn’t yet trending:
So, my conclusion as to why blockchain isn’t registering in my searches yet is simply that the oil industry has a much slower pace of evaluation and adoption than other fields. It’s just too early for blockchain, which is not well understood outside of cryptocurrency circles and early technology adopters.
Oil executives are actively discussing and applying many other digital tech concepts, particularly those that have had time to mature a bit in other industries. Concepts like the Internet of Things, machine learning, predictive analytics and AI are indeed changing how the oil industry conducts its business in 2018.
So, will blockchain be next to have an oil impact? I think it has some real potential in the oil business, and I’ll continue to monitor the conversation to see when it appears. Here’s a few ways I could see it catching on:
- Safety-Critical Equipment Monitoring. Every certification, test, incident, repair, etc., could be recorded creating an open transparent record of a given component’s life and performance in the field.
- Materials & Logistics Management and Tracking. Oilfield tools and consumables often go through numerous hands and destinations before end use.
- Bidding on Tenders and Contract Management. Oil companies often use complex, multi-round tenders and contracts with milestones and performance clauses to procure services. Blockchain could be used as a vendor management system.
- Permit and Lease Management. Blockchain could be used to manage the validity and content of permits and establish a public record of leaseholder rights.
- Useful Life Monitoring. For example, a frac spread’s stages completed, parts replaced, hours of service, vendor interaction, etc., could be tracked internally with blockchain and used to predict the need for replacement parts.
There is real potential for blockchain application in the oilfield supply chain anywhere tracking and bookkeeping come into play. The end goals include improved safety, efficiency, transparency, lower costs and data security.
My guess is this technology could start to pop up more in the oil business conversation in 2019 / 2020, but only if it is proven in some other industrial sectors first. I’d be surprised to see the oil industry take a “pioneering” role on blockchain, but then again it wouldn’t be the first time something in the oil business has surprised me…