HOUSTON—Blockchain technology has been a floating concept in the energy industry for years, but its lackluster performance begs the question if it is worthy or just overhyped.
Considering the life of blockchain, a panel of energy executives discussed whether the technology actually holds the potential to transform the industry at KPMG’s 2019 Global Energy Conference on June 5. Its failure to crossover to popularity in the industry was chalked up to a combination of issues, but mostly contributed to a collaborative failure throughout company pipelines, according to the panel.
“Blockchain requires a lot of collaboration and a lot of buy-in from different business lines. A lot of the major challenges are around governance especially when you’re dealing with consortiums and different players around the table,” Amy Fisher, business development at R3, said.
Despite disrupting industries like banking, startups and the crypto-economy, blockchain hasn’t had the same influence in the energy industry. Like much new technology in the industry, blockchain has been met with resistance. This has proven a significant hurdle, considering the technology requires cross-functional collaboration.
“This technology is something you have to have multiple interconnected parties agree on digitally,” Rebecca Hofmann, U.S. blockchain strategy and innovation at Equinor, said. “If you can’t get the interconnected parties in the room and agree—and that’s not an easy thing to do—then it doesn’t happen. It’s not something you pull off the shelf and just implement.”
For Equinor, however, Hofmann explained that piloting of the technology has been successful. She said the company applied blockchain to its manual areas of external processes like trucking and saltwater disposal as it was “easier to tackle than oil and others”.
“We’re hoping in the first phase of this, and looking at it, we’ll be able to build [on it], take those learnings back into our companies and at the same time produce something that we can eventually implement and bring value through all the different functions…it’s a win-win,” she said.
Building on its promise, a 2019 Global Market Insights report predicted that growing security concerns, interconnection and digitalization will result in a hike in blockchain technology in the energy market from $200 million in 2018 to about $18 billion by 2025, according to news release in April.
“If you could imagine in the future you get to work in a seamless, integrated way where everyone has one source of truth and you get a copy of that truth and it goes into your databases,” she said. “That visibility does not exist today, but blockchain is now allowing that one source of truth which everyone can interact with that we really didn’t have before and I think that’s the most interesting and difficult thing. But we’re tackling it and it’s moving.”
Despite the negative air around creating consortiums for this technology, Hofmann said Equinor and a few other oil giants stepped in to back blockchain-based Vakt Global, an energy commodity trading platform.
Created in 2017, the consortium—which also includes Royal Dutch Shell, BP Plc and recently joined by Chevron Corp. and Total SA—will aid in making commodity trading live, according to a Reuters report in January.
“We’ve been overwhelmed by the strength of response to the VAKT concept. Launching into our first market with such high-caliber first users is a transformational moment for us and the industry. But it’s just the start: success for a blockchain solution depends on widespread adoption and we’re looking forward to seeing the ecosystem grow,” John Jimenez, Vakt Global’s interim CEO, said in a 2018 press release.
Although blockchain’s road has been long and rocky the panelists insisted there is a productive future for the technology, betting that in five years the conversation, as well as blockchain, will take a major turn for the better.
“The benefit of it is just so immense,” Hofmann said.
Mary Holcomb can be reached at mholcomb@hartenergy.com.
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