Yesterday, the OOC Oil & Gas Blockchain Consortium announced it completed a trial for blockchain-based authorization for expenditure (AFE) balloting in collaboration with Canadian tech firm GuildOne. The alliance consists of several major oil companies including Chevron, ExxonMobil and Shell.
AFE balloting is used to approve large expenditures related to exploration, development and production. Most exploration projects are joint ventures which makes blockchain a good match for sharing. Depending on how much of the expenditure a participant agrees to bear, AFE balloting determines the final interest of parties in a joint venture project.
The legacy AFE balloting process is manual and largely paper-based, where an operator sends ballots via registered mail or courier to invite prospective joint venture partners to participate in new capital projects. This process may take months to complete. Owing to a paper trail, it becomes difficult to calculate working interests of partners which may lead to delays and disputes.
In the proof of concept (PoC) by OOC, the operator submitted AFEs digitally under multiple scenarios to nine non-operating partners using the blockchain solution from GuildOne. Smart contracts automated the calculation of working interests based on the responses from the stakeholders over several balloting rounds.
In September, GuildOne was awarded the contract to develop a blockchain solution for AFE by the OOC consortium. All members of OOC — Chevron, ConocoPhillips, Equinor, ExxonMobil, Hess, Marathon, Noble Energy, Pioneer Natural Resources, Repsol, and Shell — participated in the trial which lasted for less than four months.
“Successfully proving the application of blockchain in the AFE balloting process with all ten operator member companies demonstrates the power of this technology and its ability to transform fundamental oil and gas business activities,” said Rebecca Hofmann, chairman of the OOC Oil & Gas Blockchain Consortium.
The positive result of the PoC will now be leveraged by the consortium to streamline joint venture management. In 2020, OOC plans to combine AFE balloting and the joint interest billing (JIB) exchange use cases to develop an end-to-end solution for the joint venture management process. JIB deals with billing and payment of expenditures between joint venture operators.
“The success of this POC demonstrates how the industry can use blockchain technology to address these pain points, and we expect to leverage learnings from this project to realize key blockchain frameworks and guidelines for the oil and gas industry,” said JD Franke, vice-chairman of the OOC Oil & Gas Blockchain Consortium.
Meanwhile, Chevron and Equinor are part of another prominent oil and gas initiative, VAKT, which is trialling blockchain for post-trade processes.
Source: Ledger Insights