Blockchain Could Bridge Data Divide Between Oil Producers, Pipeline Firms

Blockchain Could Bridge Data Divide Between Oil Producers, Pipeline Firms
Firm thinks blockchain tech could cut costs, improve transparency and data quality in maintaining crude oil purity standards.

The redundancy in pipeline monitoring and data collection equipment that oil producers and midstream operators use to maintain crude oil purity standards can yield extra costs, poor transparency and inconsistent data quality. A U.S.-Canadian digital technology consulting firm contends that blockchain technology could help to dramatically mitigate these problems.

“We’ve heard from customers that often the producer and the operator will each depend on their own separate proving equipment at the point of custody transfer, potentially costing hundreds of thousands of dollars in additional expense,” Scotty Perkins, senior vice president of product innovation with Quisitive, told Rigzone. “They also will install duplicate flow and safety measurement equipment to ensure that the operator is protecting the transit areas and the integrity of the product as it’s being transported. They do this because they’ve been conditioned by experience to only trust their own data, mostly due to poorly calibrated equipment, but also due to unscrupulous behavior.”

Small variations in basic sediment and water (BS&W) and specific gravity measurements can greatly affect the sale price of the product, explained Perkins, adding that the producer wants assurances it is being treated responsibly.

“This leads to not only substantial capital investment, but also the ongoing cost and frustration associated with reconciling two sources of data when evaluating the operator’s performance to the contract,” Perkins said.

Finding Common Ground

Quisitive, a unit of Toronto-based Fusion Agiletech Partners, recently unveiled a proof-of-concept (POC) – “Blockchain Oil Pipeline” – that it maintains would ensure trustworthy data that the producer and pipeline company can agree on. Consequently, the company asserts the blockchain platform – a distributed digital ledger for recording transactions – would cut redundancy and boost profitability for both parties.

“Blockchain-based processes make data trustworthy, accessible and tamper-evident,” said Perkins. “Moreover, for heavily monitored or regulated processes, it makes operating data much easier to audit and reconcile, saving operators and producers substantial costs.”

During a May 21 strategy briefing at the Microsoft Technology Center in Houston, Quisitive presented the POC for their platform to an invited group of oil and gas executives. The company stated that it plans similar demonstrations in Dallas, Denver and Toronto in the coming months.

According to Quisitive, the demonstration POC uses Microsoft Azure Blockchain Workbench and Internet of Things (IoT) technology. Perkins outlined the four basic steps of Blockchain Oil Pipeline as follows:

  • A cloud environment is created in Microsoft Azure and the key parties gain permission to access that shared environment, which includes the setup of blockchain technology such as Ethereum, Hyperledger or Corda.
  • Under the Azure framework, IoT devices linked to the key pieces of proving equipment capture important events such as certified calibration measurements to prove that equipment works properly.
  • At custody transfer, BS&W and specific gravity measurements are permanently stored on the blockchain so that the readers cannot be disputed in the future.
  • During product transport, IoT devices along the pipeline send flow, pressure and temperature data to the cloud and store it on the blockchain. As a result, all parties can see data captured in one shared environment. Moreover, any party that needs to react to dangerous pressure conditions or other safety issues can do so immediately.

“This is great for both the operator and the producer,” Perkins said of the latter step. “The operator can easily prove to customers and regulators that things are being managed responsibly, and the producer can see that the product is being moved safely and without loss.”

Perkins added that blockchain is just one component of a broader “cloud technology solution” that also integrates IoT instrumentation, machine learning and artificial intelligence (AI).

“A cloud-based solution for this business process allows all the parties – producer, operator, certification authority, regulator, etc. – to have a common shared view of critical custody transfer data and pipeline operation data, all captured directly from the devices through SCADA (supervisory control and data acquisition) and IoT,” Perkins explained.

In addition, Perkins stressed that the blockchain makes data “completely trustworthy.”

“It’s completely sequential, secure and it’s immediately evident if someone tries to tamper with the data captured by the devices,” said Perkins. “From a security standpoint, the cryptographic capabilities of blockchain and the security framework of Microsoft Azure also allow visibility to any event to be restricted to only those parties who are supposed to see it.”

What’s Disruptive About It?

The security aspect of the platform is what makes it disruptive, added Perkins.

“Look, capturing SCADA instrumentation data is not new, nor is storing it in databases,” Perkins said. “What’s genuinely novel and disruptive about storing data on an enterprise blockchain in a cloud environment is that it makes the data completely trustworthy. That allows brands that pride themselves on transparency and quality of operation to easily prove that to their customers, including through shared dashboards and reporting.”

Quisitive also maintains the data reliability extends to the regulatory realm.

“For highly regulated businesses, such as midstream pipeline operators, it can be dramatically easier to show regulators that the operation meets or exceeds responsible standards by presenting all the data in one place without any opportunity for gaps in the timeline or tampering,” said Perkins.


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