Is My Upstream Process Really Blockchain Ready?

So, you’ve demystified and de-risked blockchains in the upstream oil and gas industry as much as you can and decided the technology can provide benefits for your operation. Now what do you do? How do you get ready to implement a blockchain solution for your most contentious and time-consuming well drilling and delivery processes?

  1. Find your data. In order to make a blockchain meaningful, there must be meaningful data to write to it. Where does your KPI data live? Is the KPI data being collected and aggregated by others for their own purpose? The upstream oil and gas business is awash in data or variouing types and is being collected for varying purposes. This data is going to be captured forever, therefore, issues must be worked through before any well data is written to an immutable ledger.
  2. Separate out your data. Your organization creates massive amounts of data every day related drilling and completing a well. In that massive stream of information, what is meaningful in interpreting your relationships to others in the upstream process? What data do you need to manage your contractual relationships? How do you separate the needed data from your other data that may be used for another purpose? Can the information be standardized? Do your potential counterparties use a separate standard and must you conform to their standard? The IADC has created strong data standards in drilling. Are there other standards that can be deployed?
  3. Proof your data. If you plan to use your data to do something meaningful, like management contractual obligations to automate payments between drillers, operators, frac spread specialists, water management…  ALL of that data must be bulletproof. Develop a meaning way to proof the data and test its reliability over time. What happens if the data flow stops? Can you reestablish the connection quickly? Does the data have any places where it can be manipulated by malicious actors? Does each data point really represent what you think it does? Are there objective tests you can perform on your data to measure its reliability? Does the data have rails or tolerances that can be programmed in to its interpretation so that data that falls out of tolerance is recognized but not used? The big money upstream needs absolutely reliable data!
  4. Assign responsibility. Using data, smart contracts and blockchains is a major commitment for your organization and someone must be in charge.  Blockchains and smart contracts cross several domains; accounting, finance, IT, drilling engineers, even media relations if the data will be part of any public reporting processes. Who is the domain expert? Is it your legacy IT department or is it someone else? Are they empowered to make decisions? Who really has a full picture of how the technology is interacting with the overall upstream company processes from the highest level?
  5. Sell internally. Are all stakeholders committed and being kept up to date on the changes that are coming and are they fully supportive? Is the educational process really complete? Have all the right people been giving an opportunity to express their skepticism? A lack of buy in can diminish the value of the company commitment and a lackadaisical commitment or worse, a surface level commitment but an actual real resistance can discredit the technology and set the organization back in a critical time of data driven processes.
  6. Comfort the afflicted. Automation of any kind impacts jobs, everyone knows it, and there will be those who see the process as a direct threat to their ability to earn a living. Identify them and don’t avoid the tough conversation on the need to make changes. Provide them with a vision of the future state of the company and their role in it, if it exists. Do them the honor of telling them the truth.
  7. Process map the future. Your journey to a blockchain enabled future should have large landmarks and details steps and paths. Before anything is set irrevocably in motion, make sure the map is laid out, in a shareable form, and apply the appropriate metrics. The upstream oil and gas industry is full of PhDs and engineers, and if you aren’t one, you will need to think like one anyway!
  8. Consult your partners. In the end, blockchains are about parties and counterparties. To the degree advisable, let your counterparties know a change in the relationship is coming. If you’re a driller, your operator customers are probably already looking and blockchains and have in-house dedicated staff working on implementation. Get to know them! In you are in services, ask your customers what they know and where they are in the journey. If they are less informed than you, a teaching and leading opportunity has arrived! Seize it!
  9. Upgrade your knowledge. Blockchains are a nascent technology, roughly at the stage of adoption that the wider internet was in 1995. From American Online to Facebook is quite a journey and it’s one that you are on yet again, this time not just with information but with transactions as made possible by blockchains and distributed ledgers. Commit to staying up to date with this process and pick trusted sources and suppliers to keep you up to date. Bear in mind the agenda of any provider or supplier you encounter. What are they actually trying to sell you? Is it more boxes? Caveat Emptor applies here as well. Let the buyer beware.
  10. Prepare for battle. There will be resistors in a change process as potentially significant and disruptive as blockchain technology and as the leader in a company that is committed to deploying tech to enhance well construction productivity, you will have detractors. But, in the end, while you must listen, you must decide. If you are blockchain ready, you’ve decided and the winner in the fight between those who want to use advanced blockchain technology and those that want to stay in the static siloed data environment is one you have to win. The stakes are and have always been high in the upstream oil and gas industry; this is the part of the industry where legends are born! Leaders lead, and blockchain is a fantastic leadership opportunity.