OOC Oil & Gas Blockchain Consortium Successfully Tests Solution For Authorization For Expenditure

Blockchain, Innovation, News | January 6, 2020 By:

The OOC Oil & Gas Blockchain Consortium, in partnership with Canadian data company GuildOne, has successfully tested the industry’s first blockchain application for Authorization for Expenditure (AFE) balloting.

The OOC Oil & Gas Blockchain Consortium was founded to advance industry blockchain technology learnings for the purpose of defining industry frameworks and solutions enabled by blockchain technology. It was established under the not-for-profit organization Offshore Operators Committee and offers membership-based participation. Consortium members include Chevron Corp, ConocoPhillips, Exxon Mobil Corp, Equinor and Royal Dutch Shell, among others.

An AFE is a budgeting and approval form used during the planning process for a well about to be drilled and for other projects. Conventional AFE balloting is a manually intensive and largely paper-driven process that can take significant time and frequently results in subsequent working interest disputes. Blockchain can help streamline the approval process by reducing cycle time and errors, as well as provide immutable documentation of the final working interests.

According to the consortium, the proof of concept (POC) tested the ability to send ballots and make elections digitally utilizing blockchain technology.

“In the test, the operator electronically submitted AFEs under multiple scenarios to nine non-operating partners using blockchain nodes, which then automatically calculated working interest percentages based on the elections made by each partner,” the consortium said. “The balloting lasted several rounds until a final working interest among participating parties was determined.”

Rebecca Hofmann, chairman of the OOC Oil & Gas Blockchain Consortium, said that the POC demonstrates the power of blockchain technology and its ability to transform fundamental oil and gas business activities.

The consortium plans to expand the AFE balloting scope to capture more complex scenarios, while initial design and testing will be performed on the joint interest billing (JIB) exchange process, which deals with the billing and payment of expenditures between joint venture partners. The intent is to integrate JIB exchange with AFE balloting for a seamless end-to-end way to manage joint venture operations.

“AFE balloting represents just one of several use cases with common industry pain points being advanced within the consortium,” said JD Franke, vice-chairman of the OOC Oil & Gas Blockchain Consortium. “The success of this POC demonstrates how the industry can use blockchain technology to address these pain points, and we expect to leverage learnings from this project to realize key blockchain frameworks and guidelines for the oil and gas industry.”