CALGARY—It’s blockchain week in Alberta, and we know what you’re thinking: you still don’t know what blockchain is.
But blockchain is real, and experts are saying it has the potential to shake up Alberta’s core industry, oil and gas. How? By allowing companies to share information and create contracts easily and securely, therefore saving time, money and resources.
Still confused? That’s why we’re here with a primer on the mysterious technology and how it could help Alberta’s energy industry.
On the first day of Alberta Blockchain Week, a room full of people from the energy and technology sectors listened to a panel of experts in both industries talk about the potential of blockchain for oil and gas. It sounds complicated — new technology often does — but big energy players are starting to listen and even invest in blockchain.
What is blockchain?
Blockchain is a secure, shared database. A group of people or companies can all access it — but no one can change it unless everyone agrees.
This is significant because it means several companies working in the oilpatch, for example, can put together a contract or agreement and know that they’re all looking at the same version of the contract. Unlike an agreement on paper, there aren’t multiple copies, things don’t get lost, and each company isn’t left to do its own calculations on what’s owed.
According to Stephen Entwistle, communications lead for GuildOne, a company that used to settle such disputes and now sells blockchain, the new technology avoids disagreements.
“This lack of trust is really coming at a significant cost from a business standpoint,” he said.
For example: say Company 1 is leasing land from Company 2, and in exchange, has agreed to hand over a share of the profits.
But when it comes time for Company 1 to actually pay Company 2, there’s a high likelihood their interpretations of the contract won’t be exactly the same, according to James Graham, the founder and president of GuildOne. Each company did their own calculations, and compounded with the likelihood of human error, there’s a statistically high chance the two companies will end up in a dispute.
But if the contract was a smart contract — meaning one that already did the math — the payment would be settled automatically.
Graham boiled the idea of blockchain down to facts — instead of each company having its own version of the truth, there’s only one version, and everyone agrees on it.
How will it change the energy industry?
It’s this centralized truth, as Graham puts it, that is the selling point for oil and gas companies. The oil industry includes a lot companies involved in complicated contracts with each other, which, in turn, can lead to disputes.
Keith Steeves, chief financial officer of NAL Resources Management, said the majority of such contracts end up in dispute.
Some disputes are small and easily sorted out, while others are much bigger. And they all stem from the fact that each company is making its own calculations based on its own interpretation of the contract.
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But creating a blockchain for a group companies means disputes go way down, explained Graham. This cuts down on administrative costs, streamlining financial transactions and negating the need for costly disputes.
Steeves said the oil and gas industry has traditionally been slow to react, and that moving to blockchain will be a “fundamental shift” for the industry.
But he’s convinced it’s the right shift, especially after seeing the results for himself: the company went from 90 disputes a month to 15, he said.
“We’re an industry that loves to be second. And that means that nobody will do anything until somebody else has done it,” said Steeves. “I think we have to think about how we do this together.”
What are the challenges?
Graham and Entwistle said one of the biggest misconceptions they face is the idea that cryptocurrency and blockchain are the same thing. They’re not — blockchain is the technology cryptocurrency operates on, but a company doesn’t need to operate in Bitcoin to benefit from blockchain.
There’s also a worry that Albertans are familiar with: efficiency and less administration could mean more jobs lost in a sector that has already seen its numbers drop in recent years.
But Graham said that’s the reality of any disruptive technology, and that what he thinks is being missed are the new jobs being created in technology.
Because of Alberta’s position in the energy industry, Graham said he sees a lot of potential for the province to be a leader when it comes to implementing blockchain.
“We’re the best across the board at regulating, we are the best at stewarding these resources worldwide,” he said.