Oil and Gas
REINVENTING THE CHEMICALS AND PETROLEUM INDUSTRY
Blockchain has the capability to turnaround the complete value chain of the industry. It can help enhance profitability and secure future growth by improving productivity, reducing cost, securing intellectual property and increasing pan company visibility
Digitisation has emerged as a key buzzword in recent years and has created a great deal of hype across multiple industries. This holds true for the chemical and petroleum industry as well where digitisation will have a significant impact on various domains – transform value chains, increase productivity, nurture innovation, and open new go-to-market channels etc. In Q4 2017, CAMELOT Management Consultants carried out a survey with top managers from the chemical industry in Germany to understand their views on digitisation. Around 76 per cent of the survey respondents answered that digitisation will be a major catalyst for sustainable growth and competitiveness for not only their own companies but the whole industry.
In total, 80 per cent of respondents believed that digitisation is a critical success factor for the industry’s success over the next three years. In the area of “supply chain and logistics”, “sales” and “production” the managers saw the highest benefits for leading the organisation to success.
BLOCKCHAIN TECHNOLOGY IMPACT ON THE CHEMICAL AND PETROLEUM INDUSTRY
Blockchain has capabilities to turnaround the complete value chain of the industry, hence, one should look at it as an opportunity rather than disruption. It can help companies to enhance their current profitability and secure future growth by improving productivity, reducing cost, securing intellectual property and increasing pan company visibility. Some of the key benefits for the chemical and petroleum industry are detailed out below:
Improved process security: Complex processes and substantial number of stakeholders in the industry lead to a greater number of inaccuracies which in turn creates the need for better governance. Third-party supervision and paper based contracting can be reduced through Blockchain based smart contracts where the amenability of parties can be increased through follow-on transactions.
Compliance management: Unethical business practices of suppliers is one of the biggest threat to chemicals and petroleum companies’ sustainability. Blockchain’s distributed ledger can register product’s origin, properties and various processes during lifecycle it goes through, eventually allowing specific stakeholders to have complete control and proper risk management.
Enhanced value chain visibility and facilitation: For decades the chemical and petroleum industry has strived for better efficiency and higher visibility. Blockchain’s implementation takes these efforts to the next level by enabling distinct functions to engage with each other on real time basis and live tracking of different parts and processes. For example, Blockchain can enable procurement, ensure fast delivery and replacement of spare parts, reducing downtime during production. The figure below shows an extract of use cases from Camelot’s database which addresses the major challenges faced in the areas of R&D, sourcing and procurement, and inventory management and distribution.
MAKE A BLOCKCHAIN STRATEGY
The five-step framework acts as an opportunity funnel and Blockchain incubation tool. It also allows the identification of use cases in line with company’s existing operational challenges and current strategy (phase 1 & 2).
After potential use cases are identified, the prototypes (proof of concept) are developed and improved as a next step (phase 3). Prototypes, once matured, gives a good indication about the commercial viability of Blockchain implementation (phase 4).
Based on viability and strategic interest, portfolio of proof of concepts are ranked and the best is chosen for commercial implementation (phase 5). The biggest advantage of using such a framework is mitigation of risk of failure and efficient utilisation of investments. Additionally, it makes the complete process more structured and streamlined.
There is no doubt about the fact that Blockchain will be a key enabler for digitisation for chemical and petroleum businesses. The technology will help organisations go an extra mile in reducing costs, improving processes, advancing data tracking and security, and increasing product safety. Even though companies have not yet been able to implement Blockchain technology on a commercial scale, a sizeable number of “proof of concept” is coming into life across industry, that are paving the way for large scale implementation.
Once scaled up across different stakeholders in the value chain, the transformation and value brought by Blockchain will be drastic. Nevertheless, small players should act as smart followers. As always, partnerships will be crucial to navigating this rewarding but challenging landscape.