Energy & Resources Logistics

How blockchain helps the oil and gas industry reduce its carbon footprint and improve SLA adherence


The big question when new technologies are introduced in the marketplace is whether they will stand the test of time and reach critical levels of adoption to fulfil their "raison d´être".

With blockchain's gradual adoption across different industries, there are two key areas where it plays a pivotal role in enhancing the oil and gas industry's effectiveness and efficiency. 

1.Carbon Credit NFTs

Greenhouse Gas (GHG) emissions from oil and gas operations stand at more than 5.2 billion metric tonnes, representing nearly 15% of the energy sector's total GHG emissions.

Blockchain's use of unique Non-fungible Tokens (NFTs) make it ideal to accurately collect and track carbon footprint data across industry supply chains. Its immutable ledger facilitates audit trails, assuring traceability, security, and accountability.

As each NFT contains a unique and non-transferable identifier, blockchain ensures identity management and security, which is critical to track carbon credits and measure the industry's emissions footprint.

In combination with powerful "what if" simulations, Mixed-Integer Linear Programming (MILP), and cloud computing capabilities, supply chain operators can estimate carbon emissions early in the planning phase. This invaluable information enables companies to accurately determine required carbon credits purchases to offset emissions and optimize route and operations cost-effectively.
Furthermore, by consciously controlling emissions during the forecasting and planning phase, industry players can achieve milestone emission targets faster.

2.Smart Contracts to manage complex logistics

A Smart Contract automatically controls the direct transfer of digital assets between parties when certain conditions are met. These digital contracts are embedded in the blockchain and include an agreement´s details and permissions that are written in code. An exact sequence of events must occur to trigger the completion of specified contractual terms between parties, which are automatically enforced. Every smart contract has a unique address in the blockchain to facilitate tracking and compliance.

In the oil and gas industry, Smart Contracts generate efficiencies and provide transparency for the establishment and fulfilment of service level agreements. For example, an operator can set specific targets with different logistics services providers, such as X% flight availability for field crew movements.

Smart Contracts can be configured for any number of service providers and agreed KPIs. Sliding scale penalties can also be applied automatically and on a case by case basis for failing to meet contractual KPIs. Through systems-driven process automation, Smart Contracts eliminate manual intervention, ensuring SLA adherence transparency, accelerating invoicing processes, improving billing accuracy, and increasing transaction security.

Towards a net-zero and smarter future

Decarbonization is an existential priority in which technology has a critical role to play. By predicting emissions early at the planning stage and tracking data automatically throughout the cycle, the industry benefits from more reporting accuracy.

Today, blockchain-based traceability is already steering the oil and gas industry towards the achievement of net-zero objectives. But beyond emissions tracking, blockchain also helps monitor business performance with service providers in more detail, improving SLA adherence.

Secure and decentralized systems that incorporate blockchain technology, like NFT and Smart Contracts, increase supply chain transparency, efficiency, and accountability by facilitating communication between stakeholders and allowing very specific indicators to be tracked with automated actions triggered based on pre-configured and situation-specific responses.

Author info

Vivekanand is Lead Product Consultant at IBS Software's Energy and Resources Logistics line of business, where he focuses on delivering optimal, tailor-made, and intuitive digital solutions that maximize value for customers. In his consulting role, he helps energy and resources logistics companies adopt latest industry trends to reduce operational costs and increase efficiency.
Vivekanand is passionate about GHG emissions reduction and sharing best practices for sustainable operations management. He possesses 16 years of experience working with major oil and gas corporations around the world, including Shell, Chevron, ConocoPhillips, and PTTEP. 


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