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The OOC Oil & Gas Blockchain Consortium has successfully tested the industry’s first blockchain application for Authorization for Expenditure (AFE) balloting in collaboration with Canada-based software firm GuildOne.
In Sept. 2019, the consortium had awarded a contract to GuildOne to deploy and demonstrate a proof-of-concept (PoC) blockchain solution for AFE balloting – a commonly used tool for garnering approval and participation in capital projects that are governed by joint operating agreements (JOA).
Conventional AFE balloting, being a largely manual and paper-intensive process, usually takes significant time and frequently results in subsequent working interest disputes. Blockchain technology can help streamline the approval process, reducing cycle time and errors, as well as provide immutable documentation of the final working interests.
According to a press release, the PoC tested the ability to send ballots and make elections digitally utilizing blockchain technology.
The test saw the operator digitally submitting AFEs under multiple scenarios to 9 non-operating partners using blockchain nodes, which then automatically calculated working interest percentages on the basis of 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 consortium said that it plans to expand the scope of the AFE balloting in 2020 to capture more complex scenarios, adding that the 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,” it said.
The OOC Oil & Gas Blockchain Consortium was established last year under the not-for-profit organization Offshore Operators Committee (OOC). Founding members include Chevron, ConocoPhillips, Equinor, ExxonMobil, Hess, Pioneer Natural Resources and Repsol.
