Blockchain technology

The stunning rise of bitcoin’s price from under $1,000 at the start of the year to above $11,000 at the start of December has generated an intense scramble by investors to identify opportunities that relate to the cryptocurrency and the blockchain – the distributed ledger that underlies bitcoin. One industry that may be particularly well suited to benefit from blockchain technology is the petroleum fuel market for oil and gas.  Petroteq (TSX-V: PQE) (OTC: PQEFF) is one energy industry participant that believes in the potential of the blockchain, recently announcing a partnership that positions it to bring the power of cryptocurrency to the sector. It joins other blockchain players such as Riot Blockchain (NASDAQ: RIOT), Marathon Patent Group, Inc. (NASDAQ: MARA), BP (NYSE: BP) and Wipro Limited (NYSE: WIT).

Equipped with patent-pending technologies, Petroteq (TSX-V: PQE) (OTCQX: PQEFF) is economically extracting heavy oils from oil sands, oil shale deposits and shallow oil deposits. The environmentally-friendly system dramatically lowers the cost per barrel of production, produces no greenhouse gases, requires no high temperatures, leaves only clean dry sand and can easily be deployed anywhere in the world to unlock heavy oil deposits.

As part of its strategy to build advanced oil processing and refining facilities around the world, Petroteq encountered an impediment: less-than-optimal global oil and gas industry supply chain channels. Already familiar with the intricacies of the oil and gas industry, Petroteq quickly recognized the business opportunity at hand. In its quest for a solution to overcome difficulties associated with the industry’s supply chain inefficiencies and bottlenecks, Petroteq recently partnered with First Bitcoin Capital to develop and operate an enterprise-grade, blockchain-based platform called Petrobloq that will enable oil and gas companies globally to conduct transactions.

Petrobloq will constitute the first blockchain-based platform devoted entirely to serving oil and gas industry supply chain needs. The project is designed to address the cost constraints industry participants face in the wake of almost seven years of oil prices languishing at levels far below their $120 peak. Petroteq expects Petrobloq users will realize cost and time savings while benefiting from the increased transparency offered by the blockchain, enabling them to more easily navigate the vicissitudes of an ever-evolving global market.

“As a company focused on the development and implementation of proprietary technologies for the environmentally safe extraction of heavy oils, we understand the importance of developing new technologies, especially blockchain-based innovations, to help companies in our industry to get competitive advantage and cost efficiency,” Petroteq CEO Alex Blyumkin said in announcing the partnership with First Bitcoin Capital.
The blockchain is an open-distributed ledger system that stores encrypted “blocks” of information over a worldwide connected network of anonymous computers. Because the network stretches over many computers, the “chain” making up the system’s “blocks” is distributed, or spread, over the network in a decentralized manner, meaning that it is not under the central control of any single entity, whether government, individual or company.

As new blocks are created, they are added to the chain linearly according to chronological order, enabling the blockchain to grow indefinitely. All information added is recorded permanently and synchronized across all of the networked computers in the chain so that retroactive editing or alteration of entries is impossible. As a result, the data is “secure by design,” providing a publicly available, verifiable history of all past transactions.

Its robust transparency and resistance to alteration makes the blockchain a powerful tool for records management activity involving any type of digitized assets. Given the heavily regulated nature of the oil and gas industry, with a variety of government protocols and industry specifications related to environmental impacts, refining, taxation, etc., the blockchain offers a secure method for completing tasks required under that framework. These could include real-time data sharing with regulators or exchanging information with joint-venture partners.

The blockchain’s transparency also provides a company’s managers or investors with the ability to audit its history, helping to avoid contract conflicts and adding efficiency to the due diligence process. By potentially saving time and eliminating contract snafus that could lead to millions of dollars in losses, the blockchain may revolutionize the way business is done in the oil and gas industry.

Another area of impact is the ability to reduce the damage caused by hacking attacks. In the wake of attacks on major energy industry players in recent years, the industry may be seen as highly vulnerable on a global basis. The blockchain’s nature as a system that is synchronized and distributed makes it highly resistant to hacking.

“Oil and gas companies could benefit from blockchain technology for a range of applications, from optimizing efficiency to transparency in business transactions to securely storing inventory data on the blockchain,” First Bitcoin Capital CEO Greg Rubin stated in a press release. “In the last few years, the industry has struggled with price volatility and production levels, which has led to cost-cutting efforts, reduced outputs and layoffs. These challenges have prompted many companies to rethink how they operate and to identify new ways to optimize supply chain management and transaction processing. As such, blockchain is gaining traction and broader acceptance by oil and gas industry for its potential to fundamentally change the way certain transactions are conducted.”

Petroteq and First Bitcoin are quickly moving Petrobloq into key industry circles. Earlier this week, Petrobloq joined the Enterprise Ethereum Alliance (EEA), the world’s largest open-source blockchain initiative, and the American Petroleum Institute (API), which is the only national trade association representing all facets of the oil and natural gas industry as it promotes safety across the industry and influences public policy in support of a strong, viable oil and natural gas industry on a global level.

“PetroBLOQ is looking forward to leveraging our collective experience in the oil and gas industry and with blockchain technology to help solve the inherent difficulties and complexities up and down the industry,” Rubin stated in the news release.

In addition to its blockchain initiative, Petroteq is expanding production capacity at its Asphalt Ridge heavy oil extraction facility near Vernal, Utah. The company’s leased oil resources contain 87 million barrels, with production expected to start in 2018 toward a goal of 5,000 barrels of oil per day (BOPD) in 2019. In addition, the company owns a minority stake in an exploration and production play in Southwest Texas held by Accord GR Energy Inc.

In a sign of their faith in the company’s prospects, Petroteq’s CEO and chairman have invested $10 million of their own money in the company.