Oil and gas operators have a multitude of tasks to perform for smooth business operations. In addition to various engineering, technical, and operational decisions, there are back-office operations that should be efficient to keep business running smoothly, including production royalty management (PRM). The current system for PRM is extremely complex and costly, and involvesmultiple parties/contracts and often causes disputes.
A blockchain-based solution allows the organizations to better navigate complex laws, courtrulings, and legal jargon that determine how billions of dollars are distributed every year. There are two aspects to PRM —royalties owed and royalties received—and the proposed solution caters to both operators and independent mineral owners. The operator should compile production and revenue data monthly and distribute it to all owners as per their individual lease. The expenses and marketing costs should be entered into the accounting system before revenue is distributed. Owners may be skeptical about data shared; therefore, the entire process can take up to two or more months. Furthermore, privacy is of utmost importance because theoperator can neither share data between owners nor disclose proprietary information.
This paper proposes the entire royalty management system be hosted on a permissioned blockchain. Given their intrinsic nature of trustworthiness and transparent execution of transactions involving multiple parties, blockchain can streamline the royalty distribution process. The design and implementation of a smart contract for consent-driven and double-blind data sharingon a blockchain platform is presented. The system is designed for both inter- and intra-organizational transaction—a local peer interacts with an associated anchor peer within the globalnetwork. In addition to transparency and efficiency, this method provides important features ofprivacy and auditability while limiting ledger size. Further, peer identities are hiddenfrom each other while they collectively agree on transaction outcomes, and data will never be shared among the peers of the blockchain without explicit consent from the owners to ensure that the conflicting objectives of privacy and transparency are met.
Blockchain is peer-to-peer decentralized digital ledger technology with promising potential. Even after all the recent innovations, the owner-relations department still operates using old methods. An innovative blockchain-based solution to reduce time and money spent on disbursing revenue for the operator and to increase the time value of information and trust in the system for the owner is presented.