Drilling contractors often face an uphill battle when it comes to getting paid based on their daily drilling activities and reimbursable expenses. The average service delivery-to-payment process currently runs 60 days or more, leaving drilling contractors with elongated days sales outstanding (DSO).
With anything blockchain, there’s a hedging for adoption and the oil & gas industry is no different. Companies often skirt the first position and instead search for safety in numbers when it comes to taking up innovative technologies. Like a school of fish in need of camouflage, straying ahead to lead the charge comes with risk and, worst case, failure. But it can also yield great reward.
Industry has long been easily excited about concepts from virtual and augmented reality (VR/AR) to autonomous vehicles, wearable technology to chatbots and drones, the list goes on. After innovations emerge, the pattern after much debut hype, is to go underground into pilot programs until the market achieves tangible validation.
The American oil market crashed below $0 a barrel this week; an unprecedented historical low.The “stage set for a ‘most uncertain’ future,” was already indicated by early earnings . With a precipitous 60% price drop since January , flatlining this week and even dipping into negatives , oil & gas companies across the board are cutting budgets , hunkering down and halting operations.
Commodities production and transportation is a complex chain of events that involves multiple parties, volume measurements and transactions for each unit moved. In oil & gas, crude oil and its derivatives, water and other natural resources like sand and natural gas, are critical components to the production of energy. Each resource must be moved to and from the site of production, typically in poor conditions over risky or remote roads. In U.S. operations alone, the produced water market is worth an estimated $33.6 billion.
More companies today are implementing blockchain technology to apply smart contracts across commodities transport to capture efficiencies and cost savings. By automating payments between the network of intermediaries necessary to move a commodity end-to-end from production, participants can increase access to free cash flow, a must in today’s market climate.
Right now, it’s imperative for oil & gas companies to reduce operating expenses (OPEX) and save cash. With recent oil prices in a four-week free fall, down 60% since the start of the year, further job losses, bankruptcies and consolidations are unfolding.