In our previous blogs we discussed about the implementation of Blockchain Technology in sectors like Education, Healthcare, Media, Electricity and more. The only sector that was untouched was Oil & Petroleum. This industry is one of the few that has not changed its working pattern even a bit for a long time now. But now the groundbreaking technology, Blockchain has paved its way into this multi trillion-dollar Oil and Petroleum sector. It has officially penetrated Big Oil Sector and is finally catching on.
Oil and Petroleum sector has been slow but it has finally managed to hop on to the Blockchain Wagon.
For those who don’t know how oil sector works, well daily many crude oil tankers sail from seaports around the world carrying large quantity of crude oil and a paper document known as bill of lading.
What is Bill of Lading?
A detailed document that consists list of ship’s cargos issued by carrier or agent to the shipper as a contract of carriage goods. This document is required in claims of compensation for any damage, loss or delay and to resolve disputes regarding ownership of the cargo. It verifies the ownership of a commodity.
This is the way how Oil sector has been working for years. But some traders, big producers and banks were looking for a way for cost cutting, to earn more profits and for this they wanted something that is concrete. This is when Blockchain technology the online ledger where you can keep records of each transaction using encryption that ensures safety hit came in.
Blockchain technology gives them a platform where the network users can view deal history and keep a track of it. Many oil trading companies, traders already use this technology to store data, so switching to Blockchain technology won’t be difficult or time consuming. Blockchain technology will make things easier by making the process transparent and eliminating the need for documentation.
Companies Working Together
Group of companies including oil producers like BP Plc, Royal Dutch Shell Plc and Statoil ASA, commodity traders Gunvor Group Ltd., Mercuria and Koch Supply & Trading, and lenders ING Group NV, ABN Amro Bank NV and Societe Generale SA have joined hands to build a Blockchain based platform for personal oil trading. Working of this has already been tested with a tanker of crude oil. The actual shipment reached the owner (China National Chemical, Corp) three times faster than what it always did.
Making a Difference
All this was made possible as it took only 25 minutes to verify the transaction, that normally takes 3 hours. Also, the process eradicated the risk of human errors that use to take much longer to get sorted.
“In our business, you have people managing transactions all over the world,” said Souleïma Baddi, a managing director and deputy head of commodity trade finance in Switzerland for Societe Generale. With a Blockchain system, “people will perform their tasks immediately — directly on their phone or on their iPad where they do their job” — rather than relying on others to collect the necessary paperwork, Baddi said.
Furthermore, with the implementation of Blockchain technology there will be less requirement of back office workers. Doing the complete process manually is time consuming and there are more chances of errors which will be completely eradicated by the use of Blockchain technology. Obviously, this means most workers will lose their jobs especially the middle level professionals. This may sound as bad news but once this technology is implemented, resources and time will be saved and huge profits could be earned. We have already seen many examples of how Blockchain technology helps and makes a process transparent and less time consuming.
Companies are always interested in adopting ways and means to cut down cost and stay secure. For this they adopt various methods, use online record and are now signing up with Blockchain technology company. They are investing their trust on Blockchain technology and considering it the process that will sort their problems of human errors, time, cost, and security.
Like other new systems it too has to face hurdles, rejections, from cost of implementation to indecisiveness about putting data online all is considered. Plus, replacing the paper document of bill of lading with an electronic bill of lading is not easy. The electronic method doesn’t have legal sanctioning as the paper document.
But at the same time, we cannot forget, paper document is liable to be forged, you can’t rely on them without doing a background check that is not the case with electronic bill of lading. To deal with this situation traders are agreeing to use Blockchain technology as it is more secure and transparent.
“People have bought and paid for goods off those fraudulent title documents only to discover that what they thought they bought wasn’t there,” Mercuria’s Cross said.
Many companies agree with implementation of the new technology as they want to reduce errors, enhance security and monitor all the transactions. Even supporters of online records agree that Blockchain will let everyone in the group have control over data thus making trading easier.
Plus, companies like BTL’s technology for trading European gas doesn’t use a paper bill of lading, also when the test transaction was done by the group of companies with the oil tanker sent to China, paper bill of lading wasn’t used.
Eradicating the use of documented bill of loading will save time and companies, traders would be able to use the energy to work on something that really matters more than documentation.
Blockchain Technology – the Future
This change in Oil & Petroleum sector clearly illustrates how important Blockchain technology has become. It is no longer a myth or a complex technology that people will be scared to adopt. Now everyone and mostly all the sectors have understood how helpful it is and what they can achieve if this trending technology is used in their work.
Not only will it help to save time, resources and manual labor, but will also help to earn more profits thus helping the economy to rise and everyone who will use it will be able to manage things more securely than others.