Hydrocarbon Processing - September 2021 - 9

G. STEPNEY, P. HORLER and R. CHAUHAN,
Withers and Rogers LLP, London, UK
Business Trends
Patents provide a unique insight into oil and gas
blockchain opportunities
Blockchain and distributed ledger technology have gained
widespread media attention in recent years, with much of the
spotlight falling on Bitcoin and other cryptocurrencies. Sectors
beyond the crypto bubble are now recognizing the potential for
positive disruption to traditional ways of working. Investment in
blockchain technology within the energy sector is predicted to
exceed $5.8 B by 2025. To secure returns on their investments in
the technology, blockchain developers are seeking to monopolize
their technology using patent systems around the world.
However, patent statistics show that blockchain developers are
narrowly focussed on fighting for a stake in limited territories,
which presents a window of opportunity for industries such as
oil and gas that operate beyond those countries seeing the densest
filing of blockchain patents.
This article explores the key concepts of blockchain, the use
case and evidence for blockchain technology in the oil and gas
industry, the current state and future of the blockchain patent
landscape, and what this could mean for the sector.
What is blockchain? Blockchain at its core is a distributed, digital
ledger. The digital ledger stores data while keeping an unalterable
record of what data has been stored over time. Each block on
the blockchain stores its own respective data. The type of data
will be specific to what the blockchain is being used for and could
include the details of a transaction or a smart contract. Each block
points to the previous block by keeping a record of the previous
block's ID, thereby forming the " chain. " Another block is added
to the chain each time new data is generated (FIG. 1).
Decentralization. The blockchain system is a peer-to-peer
network that does not require a central authority to dictate and
manage the digital ledger. Instead, the digital ledger is distributed
amongst the system participants who manage the blockchain
between themselves. To ensure that the participants are working
with a common " true " digital ledger, the blockchain system operates
on a consensus basis. This means that the " true " ledger will
be the ledger that at least half of the participants agree upon. As
such, participants can add blocks to the digital ledger, if it can
be validated by the other participants. Therefore, the blockchain
system encourages trust and transparency between the parties
involved, without having to rely on a central authority.
Immutability and security. The various cryptographic
techniques used in blockchain make it very difficult for a malicious
party to tamper with the stored data. This can be appreciated
with the basic understanding that the specific ID of a
block is dependent on its data and the ID of the previous block
in the chain. Therefore, tampering with the data in a block will
corrupt the block's ID and interrupt the natural chain. Cryptographic
techniques make it impossibly slow and computationally
expensive to make the chain look " whole " again. Nevertheless,
the consensus model ensures that a tampered version of
the digital ledger is not easily accepted by the system, which
adds a further layer of security.
Another key feature of blockchain is its ability to execute
smart contracts. A smart contract can be thought of as a conditional
transaction that is stored on the blockchain, whereby the
conditions of the transaction mimic the terms of the contract.
Once the terms of the contract are met, the blockchain will automatically
process the transaction by transferring funds or assets
accordingly. Since there is no need for a middleman or broker,
smart contracts can facilitate leaner, cheaper and faster interactions
between parties.
The oil and gas sector is primed for blockchain. The oil
and gas sector is built upon a sophisticated web of supply chains
and distribution models criss-crossing the globe. As well-honed
as these systems are, it is inevitable for various inefficiencies and
expenses to be encountered along the way. The supply chains
typically involve many individual entities, with each entity generating
large amounts of data in carrying out their individual
operations. This data can be inconsistently managed and communicated
between entities, which can lead to misinformation
and inefficiencies. Furthermore, entities are often placed under
complicated contractual obligations because of collaboration,
which can be difficult to execute.
A supply chain underpinned by blockchain offers trust, transparency
and consistency in the way that data is handled and
FIG. 1. The blockchain model leads to some particularly useful
characteristics.
Hydrocarbon Processing | SEPTEMBER 2021 9
Hydrocarbon Processing - September 2021

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