The oil industry is one of the few industries that rely on the cooperation and coordination of an entire network to ensure its continued operation. The current system is known as a “hub-and-spoke” model, where a central authority controls the setup and distribution of data. You will need the key that can only be obtained from The Official Website of Oil Profit to participate in the global crude oil economy.
The problem with this system is that it can lead to a “single point of failure,” which means if there’s an issue with one party in the supply chain, then that whole section might be severed from other sections within the supply chain network.
In contrast, blockchain technology enables participants in a network to create direct transactions with each other and also removes dependence on third parties for information validation. Blockchain or distributed ledger technology records all transactions accomplished through a decentralized peer-to-peer network. In addition, blockchain is fast and secure because it does not have a central server.
Blockchain has a disruptive ability:
Blockchain’s ability to update, validate and track digital assets without a third party makes it ideal for tracing the product from its origin to the point of consumption. The technology provides efficiency in business processes and enhances the trust and transparency between parties involved in the process. It, in turn, leads to more excellent value for oil and gas companies and their consumers.
Apart from financial applications, blockchain can also be used by people for managing digital identity, tracking shipments, and automating contracts, among other things. For example, in the oil and gas industry, the main focus would be to automate claims of ownership, transfer of assets, and reward data validation within the company.
In addition to being a more secure system, blockchain can help companies establish secure credit relations with contractors. For example, it means that when a pipe lay ship goes down after finishing its work, it can be cleared by people of all debts before it is destroyed.
Blockchain has numerous applications in the oil industry:
Blockchain technology has many valuable applications in the oil and gas industry, and some companies have already used its services for their supply chain management. The solutions are quickly adopted as every industry follows a similar pattern and requirements.
Some companies in this industry have already started using blockchain for their:
1. The digital version of the oil & gas industry royalty and license management system provides a real-time view of the royalties due for a rig on a drill site. Major oil producers like Chevron and Shell have used this solution.
2. The digital form of the existing invoicing systems used in the upstream sector to automate invoice payments, from drilling rig MPIs to production payments.
3. The digital version of the existing production data management systems. The solution, developed by BTL solutions, provides an immutable record of transactions, automating the payment and reconciliation process.
3. The digital form of maintenance management systems used to track equipment and consumables throughout their lifecycle.
4. Smart Contracts that monitor service delivery performance between parties in remote locations and automatically reward for achievement or penalize for failure to perform through no fault of their own (egg adverse weather conditions).
What are the benefits of bitcoin in the oil industry?
Companies can use bitcoin to facilitate international trade:
The oil and gas industry has many money transfer limitations for international currency transactions. About 18% of US oil and gas companies had a significant increase in purchase costs (via higher fees) because of currency transaction bottlenecks. One of the benefits of bitcoin is that people can use it for international payments without any chargebacks or identity verification.
In addition to this benefit, if a payment is made using bitcoin, then the transaction cannot be reversed or charged again by the sender or receiver, which is otherwise possible using fiat currency. With blockchain-based digital wallets like Bitcoin, you can send payments to anyone across the globe without worrying about exchange rates and international boundaries.
Bitcoin transaction does not incur banking fees:
Banks charge high banking fees for processing international transactions, especially in the case of cross-currency exchanges. Because each country has a different currency, an individual or a company cannot send money directly to any country. Instead, they have to convert the money into another currency which increases the cost of the transaction.
In contrast, bitcoin transactions charge meager fees that depend on the size of the transaction and not on other factors. As per recent news, some companies are already making payments in bitcoins for their oil business.
Bitcoin can provide more capital control to oil companies:
Oil-producing companies are often forced to negotiate financial commitments with their banks. In many cases, these debts may be larger than their reserves, and they may have little control over them. Also, oil companies often need to make payments in local currency, which can incur exchange rate risks.
Therefore, bitcoin transactions do not involve any third party or extraordinary institution, allowing the oil companies to maintain better control over their funds. It, in turn, leads to increased efficiency and lower costs for the financial institution as they do not need to convert or process payments multiple times.