Blockchain decentralization proves difficult in oil and gas industry

By November 19, 2019Ethereum
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Ondiflo, a Houston-based startup, was founded by Jean-Pierre Foehn and Rana Basu at the Blockchain in Transport Alliance (BiTA) Symposium in 2017. The software service they built on the Ethereum blockchain addresses inefficiencies across three verticals of the oil and gas industry: upstream, midstream and downstream.

Their goal was to understand how obfuscation works in multiparty transactions, as well as how to deliver on their promise to make automation “legally enforceable” using blockchain. Their strategy has been to streamline ticketing-based services — beginning with the first service order to the final payment. Instead of relying on paper invoices, the proof is in the blockchain, which also helps companies avoid risk dispute.

Two years later at the BiTA Symposium in Chicago last week, Basu, Ondiflo’s chief operating officer, shared not only the company’s successes but also its struggles.

“I’m a definite believer in blockchain, but we’ve found that production is indeed very different, and we haven’t been able to decentralize,” Basu said.

Ondiflo’s first project went live April 1 and ended July 31. BPX Energy and three trucking companies — Select Energy Services, C&J Energy Services and Common Disposal ⁠— began using Ondiflo’s platform to track their water-hauling process. With a six-week deployment time before going live, the platform connected 50 facilities and hauled 11,100 truck rotations.

“We had to rewrite code for each company just to get them on board,” said Basu. “We used geotagging, geofencing and bread crumbs. All of these provide operational controls and legal certainty.”

Ondiflo focused on the proof of value (PoV) model and acquired a large data set organized by location, timing, quantity and quality. This includes service request time, tank levels, acknowledgement of jobs accepted, time-stamped tank levels for start and end of filling and time when crossing a geofence.

In the oil field, everyone is worried about spills. With Ondiflo’s system, if a driver notices a spill and takes a picture, the blockchain will see the time stamp of when the driver crossed the geofence and took the picture. This feature exonerates the driver from suspicion that he or she caused the spill.

Also, while electronic logging devices (ELDs) have provided great insight for dispatchers into the position of the truck, the direction the truck is moving, toward or away from the job, has remained a mystery. Ondiflo’s app has provided dispatchers this function.

All parties can view how the software connected and automated devices, drivers and dispatchers. The app tracked the time it took the person in each role to complete a task and deciphered whether this role could be partially or fully automated. Invoice approval, for instance, took 26 days to approve before the blockchain app helped eliminate several of the steps. Potential cost savings also became evident ⁠— “11 cents a barrel,” Basu reported.

Because the app allowed trucking companies to see 48 hours out, they were able to optimize their shifts. This was best seen over the Easter weekend, when many drivers wanted time off, and the trucking companies were able to keep business running with 25% fewer drivers each shift. Due to the addition of automatic approvals, yard managers or accounts payable clerks weren’t necessary.

Basu said Ondiflo’s “biggest success” was that 65 drivers used the app and they only trained seven. Drivers could train each other to use the app without really understanding or caring about the underlying technology. Next week at least 100 more drivers will be added to the app in Pennsylvania, West Virginia and Ohio.

Blockchain is about connecting participants on either side, but what that equates to is “trading visibility to get transparency.” While automation comes from this transparency, automation itself does not create savings, said Basu.

“One of my biggest concerns is that if my competitor and I are on the same platform, can my competitor gain intelligence about my operations? If I put A and B on the blockchain, my competition will be able to see A and B,” he said.

Basu reflected on various difficulties, ranging from the implementing standards for back-office systems to the threat of natural disasters like Hurricane Harvey. After they finished testing the platform in Houston, they took it into production and “everything fell apart,” Basu said.

Blockchain is a recording mechanism, so it was relatively easy to write code for it, but dentralizing it was another issue.

“If someone starts sending bad data, understanding whether the problem lies with the device or the code becomes tricky. Devices nowadays are working fine and then they suddenly go nuts. They could be leaving cellular or Wi-Fi coverage or the batteries could die,” Basu said.

He said the aptitude of these human variables needs to be researched more fully in order to know if the smart contract can legally enforce itself or if a manual process will have to be used. Because of these and other human factors, the growth of the app’s automation stalled.

“By the end of week six, we had crossed 90% automation. At the end of week 13 when we brought this pilot down, we had reached 91%,” Basu said.

He granted that as a small startup, Ondiflo needs BiTA’s help to establish standards.

“We are waiting on you all to participate and provide the staff to work on these standards to bring down the costs of adoption and to make this move faster,” he said.

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