The OOC Oil & Gas Blockchain Consortium today announced that it has engaged with GuildOne to successfully test the industry’s first blockchain application for Authorization for Expenditure (AFE) balloting.
AFEs are used in the oil and gas industry to approve capital and expense projects and determine working interests among parties participating in projects under a joint operating agreement. 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 seeks to streamline the approval process reducing cycle time and errors, as well as provide immutable documentation of the final working interests.
The AFE balloting proof of concept (POC) tested the ability to send ballots and make elections digitally utilizing blockchain technology, with smart contract enabled workflows calculating working interests automatically. 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 balloting lasted several rounds until a final working interest among participating parties was determined.
“We are very excited to have completed the building and testing of this POC in less than four months,” said Rebecca Hofmann, chairman of the OOC Oil & Gas Blockchain Consortium. “Successfully proving the application of blockchain in the AFE balloting process with all ten operator member companies demonstrates the power of this technology and its ability to transform fundamental oil and gas business activities.”
The POC completes an important first step in the path to transforming joint venture management in the oil and gas industry. In 2020, the AFE balloting scope will be expanded to capture more complex scenarios, while initial design and testing will be performed on the joint…