Research News

Blockchain in the Oil and Gas Industry has Promise but Faces Challenges

June 22, 2022

Blockchain could revolutionize the oil and gas industry, but there are several open research challenges hindering its successful implementation. 


Legacy systems, approaches, and technologies leveraged for managing oil and gas supply-chain operations fall short of providing operational transparency, traceability, audit, security, and trusted–data-provenance features. They also tend to be centralized, manual, and not integrated, which make them vulnerable to manipulation and the single-point-of-failure problem.


A Khalifa University team researched the issue and found reason to be excited for blockchain technology’s potential in the industry. But there are challenges ahead despite the fact that the industry has already begun adopting blockchain solutions.


Dr. Raja Ahmad, Postdoctoral Research Fellow, Prof. Khaled Salah, Department of Electrical Engineering and Computer Science, Dr. Raja Jayaraman, Associate Professor, Department of Industrial and Systems Engineering, Dr. Ibrar Yaqoob, Research Scientist, and Dr. Mohammed Omar, Chair of the Department of Industrial and Systems Engineering, have investigated the use of blockchain in the oil and gas industry, analyzing the applications, challenges and future trends of this technology in one of the world’s most important industries. Their research was published in Technology in Society.


Industry players believe digital technologies could boost their productivity by 10 to 15 percent. Trading of oil and gas products, such as gasoline and diesel, is a highly standardized and quality-sensitive process that requires high security, privacy and fast data processing, but the majority of systems that currently exist to monitor and manage this trade are centralized, unreliable and non-transparent.


Blockchain, however, is a secure, distributed ledger of transactions that uses cryptographic hash algorithms, which the researchers believe can make oil and gas operations more efficient, transparent, and trustworthy.


A Shell, BP, and Statoil research study estimates that adopting blockchain could reduce the oil and gas industry’s transaction-execution time by 30 percent, Dr. Yaqoob said.


Blockchain offers an immutable and tamper-proof ledger, where each record created forms a block, and each block is confirmed by the community among which the platform is shared before it can be paired up with the previous entry in the chain. The blockchain is a shared database, validated by a wider community rather than a central authority, making it a public ledger that cannot be easily tampered with, as no one person can go back and change things.


Many blockchain solutions use programmable smart contracts – simple programs that can be used to automatically exchange information under predetermined conditions.


Dr. Yaqoob said. “More specifically, blockchain assists in securing and simplifying oil and gas trading, shipment tracking, inventory control, documentation, and billing and payments. It simplifies the unwieldy and complex supply chain processes by introducing transparency to the involved business processes.”


The researchers say blockchain technology uses resource-efficient consensus algorithms and irreversible hashing-based data encryption methods to secure the data and transactions relating to this industry. However, the successful adoption of blockchain technology into the oil and gas industry is affected by many factors, including immature and globally differing blockchain standards, which need to be standardized across the world for such an international industry. Additionally, blockchain technology has a high implementation cost, and legal and regulatory frameworks for blockchain need to be built.


Additionally, the computing processes behind blockchain require a large amount of energy and computing resources to unlock the mathematical challenges of building each block. The energy demands result in increased carbon-dioxide emissions, so finding a more energy-efficient mining process is a crucial research challenge.


Dr. Yaqoob said. “While there are many open challenges still hindering its implementation, we present these as future research directions, and believe there are several systems using blockchain-based smart contracts that can greatly improve critical services in the oil and gas industry.”


Jade Sterling
Science Writer
22 June 2022