The 2018 Energy Conference Network Blockchain in Oil and Gas conference took place in Houston late last year. Blockchain appears to be gaining traction in oil and gas and indeed in other verticals. The ECN event proved to be a showcase for a variety of proofs-of-concept of the technology and gave some indications of how the blockchain community plans to links the secure exchange of a digital token with a real-world commodity or asset. Oil IT Journal readers will recall that we have expressed skepticism in regard to the logic behind this (see our 2018 editorial) and doubted that a digital token can ever be entirely and unambiguously attached to a real-world item in the face of serious attempts to cheat the system. We read through these presentations with interest to see if our skepticism would be assuaged.
Many presenters walked through the merits of blockchain. Terrahub’s Dan Giurescu summed these up as a way of stopping tampering with data since writing is ‘append only’. Old data can be made obsolete but not forgotten, leading to auditability and ‘bootstrapped’ trust, all without a central authority. A blockchain can be stored in different places providing ‘disintermediation’ ie removing the need for trusted intermediaries between untrusting parties and automating contract fulfillment. Giurescu enumerated the vast number of exchanges in existence both private (permissioned) and public, referring to Matteo Gianpietro Zago’s commentary on the ‘Internet of blockchains’, aka Web 3.0. In oil and gas, BHPBilliton is said to be ‘leveraging blockchain technology for supply chain management’.
A joint Microsoft and Quisitive presentation ran through the merits of blockchain and its potential for remote parties to share transaction details in real time and ‘immediately agree that the event is consistent with the terms of the contract(s)’. This is the ‘promise of blockchain, and what makes it fundamentally different than technology before.’ Connecting the tokens to the real world requires both parties to ‘together safely operate just one measuring device’ with the blockchain used to share data immediately between both parties. Somehow, ‘if a device detects contamination, that fact is recorded immediately and cryptographically signed such that it’s impossible to be tampered with.’ Such systems require periodic re-calibration by a certification authority. Certification is likewise digitally signed into the blockchain so that all stakeholders can agree on the update. Business rules, ‘contracts’ in blockchain terminology, can be implemented in code, stored on the blockchain and executed in response to certain events. Quisitive’s solution leverages Microsoft’s Ingestion Common Services and the Azure blockchain workbench. Quisitive’s poster child is a development of Enterprise Smart Contracts for an unnamed Midstream Energy Company. These allow the operator to detect abnormal operating conditions and ‘automatically dispatch a technician’ or shut down a section of pipeline. The Midstream blockchain solution also integrates with corporate financial systems for secure payment with transactions signed by both counterparties in such a way that both banks can observe and rely on the deal. Quisitive offers workshops, proof of concept and solution development in what is described as a commonsense approach to blockchain deployment.
Tony Giroti of the Energy Blockchain Consortium (EBC) acknowledged that, for blockchain in energy, ‘the jury is still out’, but there is already ‘lots of financial services usage’. The EBC is a non-profit consortium of energy and blockchain organizations and professionals who are committed to leveraging blockchain technology to solve ‘the most compelling problems in the energy industry’. The Consortium is developing ‘Catena’ an open energy blockchain framework along with use cases, interoperability standards and reference architecture. For more, visit the Consortium. The EBC recently signed a MoU with a sister organization, the Energy Web Foundation to ‘jointly explore the opportunities, benefits and challenges of blockchain’.
For Rebecca Hofmann and Equinor, blockchain represents a means of breaking down the data-materials-documents silos in downstream manufacturing and sales. Future blockchain networks are to provide a single-source of trusted real-time data. Hofmann provided a pointer to the 2015 blockchain backgrounder from the Economist. The expectation is for a more seamless way of working with a central source of truth where business activities can self-execute and transactions recorded ‘transparently in real time with no single point of failure’, making them more secure. Roadblocks to blockchain deployment include regulations, change management and the lack of standards. Possible use cases include royalty payments, hydrocarbon tracking, joint venture accounting, supply chain management, equipment and the environment! Equinor’s current approach passes through its Enterprise Ethereum Alliance involvement, the Swiss EnergyWeb Foundation and, in the US, the Oil & Gas Blockchain Forum. According to a report in Coindesk, as of November 2018, the blockchain platform built by Vakt Global, is up and running ‘facilitating the trade in crude oil between commodity firms’ and claiming to be the ‘first enterprise grade blockchain solution in the oil and gas market.’ The Vakt blockchain was developed with help from Deloitte and ThoughtWorks.
David Womack presented IBM’s Global Finance blockchain that builds on the Hyperledger open source fabric. Maersk Shipping is onboard. IBM is ‘co-innovating’ with SAP on a oil and gas version and is also working on its own blockchain for chemicals and petroleum. IBM claims some 500 blockchain ‘engagements’.
Marc Battistello presented PIDX’ solution to the absence of blockchain standards with a roadmap to update the PIDX Petroleum Industry Data Definitions with blockchain semantics for 2019 and beyond. PIDX is working with Chevron, OFS Portal and Amalto on various related projects.
Amalto is also developing its own ‘Ondiflow’ blockchain-based oil country field ticketing ystem. Field data sourced from IoT/SCADA devices is captured into a blockchain from whence orders/tickets/invoices and payments are represented in ‘smart contracts’. Compliance and reporting also ran. The solution allows for ‘tokenization’ and demand/cargo aggregation (like in the electricity markets). Energy tokens are to become ‘long term investment vehicles for retirement funds and indexes’. Somehow, Ondiflow promises ‘zero emission’ barrels! Ondiflow is a joint venture with Consensys.
Tetyana Colosivschi (Consensys) explained how the Enterprise Ethereum Alliance ‘full stack’ blockchain comes with development tools, a certification program for EEA apps and more. The EEA stack is a conceptual framework that characterizes and standardizes components from the Ethereum ecosystem. The standards ‘drive interoperability and avoid vendor lock-in’. An EEA Energy Group (aka the ESIG) is working to define and design industry-specific standards to make industry more efficient, cost-effective and sustainable. The ESIG also is developing a regulatory framework for the adoption of blockchain technology in the Energy industry. VIANT also ran.
For Tibco’s Mike Myburg blockchain is the next big thing in oil and gas. But writing smart contracts for today’s blockchain platforms is difficult. There is no standardization varyiable capabilities and limited tooling, all of which increases the likelihood of coding errors. Another issue is picking the winning technology from today’s vast number of choices. Enter Tibco’s project Dovetail*, a model-driven smart contract solution. This ‘digital wallet’ is to become the web browser of the blockchain allowing users to view and manage transactions. In true Tibco style, point-to-point interactions are replaced with a blockchain-based bus spanning the supply chain.
* Project Dovetail builds on open source components and TIBCO’s Golang-based Flogo Enterprise Studio open source engine.
Nick Spanos (Zap.org) presented ZAP’s Energy Ledger as a vehicle for tokenizing Venezuela’s oil!. This would allow direct investment in oil via a blockchain whose tokens relate to smart contracts tied to flow meters. Zap is billed as 'Venezuela’s missing link’ i.e. a solution to hyperinflation.
Bert Blevins (LINN Energy) tried to separate the hype from the current blockchain reality. The merits of the technology are many, but so are the current blockchain offerings (Blevins enumerated around 15). What is needed is blockchain to blockchain interoperation, perhap made possible via the Azure blockchain workbench. Blockchain is not the only interesting technology in the automated supply chain. Blevins cited Scatter (signing and identity), Flow, and FlowXO (for event triggers). But beware, to date, there has been an estimated half a billion dollars lost in smart contract transactions, due to bugs in code, nefarious actors, exploits, and the ‘unforeseen consequences of the massive one-sided power of the smart contract’.
Comment: You can see how the blockchain brigade is trying to hook its digital tech into the physical world with the connection to the IoT although it may be a bit naive to tie everything into a scada meter. Joint venture and royalties reporting are always more complex that they seem. Meters drift, breakdown, there may never be enough data on the blockchain to avoid some unscrupulous person siphoning off the crude or whatever. Folks further down the chain will have a hard time verifying this. In the best circumstances, verification itself may require technology beyond the ken of many partners in the chain. The complexity of the blockchain is compounded by the likelihood of having to interact with multiple versions of the same. One is tempted to ask exactly what the problem was that the blockchain is trying to solve. Also, curiously, there was no mention of the compute overhead and reportedly huge energy consumption that accompanies blockchain. So, where’s our skepticism today? Is blockchain a boondoggle? That, as they say, is a good question.
More from Energy Conference Network CN. You may also be interested in the upcoming US Oil & Gas Blockchain Forum March Luncheon chez Chevron, Houston on March 21, 2019.
© Oil IT Journal - all rights reserved.