I will admit to being a little bit puzzled and more than intrigued upon hearing the news over the summer that Diamond Offshore Drilling had launched its Blockchain Drilling Service. Until that point in time, blockchain had, in my mind, equaled cryptocurrency trading, and that conjured up visions of a person decked out in their jammies and fuzzy bunny slippers sitting behind their laptop screen mining for bitcoins while dreaming of their bit-riches.
Was Diamond Offshore adding bit mining to its portfolio of services, I pondered. The answer is no, but what the company did do by embracing digital technologies was add the ability for its clients to reduce their total cost of ownership.
So what is blockchain, and how does it apply to making hole?
Matt Higginson of McKinsey & Co. in a Digital McKinsey podcast described blockchain as a database or “distributed ledger” shared across a number of network participants, and at any moment in time, each member of that network simultaneously holds an identical copy of that blockchain database on their computer.
Speaking at the 2018 IADC Advanced Rig Technology Conference & Exhibition, William Fox, chief product officer for Data Gumbo Corp., explained that blockchain enables all parties in a transaction to have one version of the truth in the distributed ledger. Sitting on top of those ledgers are “smart contracts” that automatically execute the terms of a contract without human intervention, Fox noted.
“Automating execution of contracts eliminates accounting expenses, time delays, inaccuracies, legal fees, mistrust and disputes. At the same time, it increases audibility and profitability,” he said in his presentation. “It aligns incentives of all participants within the drilling industry toward a common goal.”
One example he hears quite often is how long it can take to see payment of a field ticket for services.
“So the work is performed, but it takes the guy seven or eight days to input the paper ticket into the system that will be scanned and emailed to somebody for checking,” he said. “Then it goes into an ERP [enterprise resource planning] system where there is an authorization order and multiple sign-offs before the ticket is ever approved for payment.”
Blockchains and smart contracts can help speed up that process as certain aspects of the payment process can be automated if all parties to the contract agree.
“When a transaction is placed on a blockchain system, it’s fully transparent and fully auditable,” he said. “Our approach is that if there’s going to be a payment that is triggered by a field ticket, everything that backs that transaction up to trigger a payment goes on the blockchain so that all parties retain a copy that doesn’t get lost in the shuffle.”
Data Gumbo and Diamond Offshore developed the Blockchain Drilling Service. The scalable cloudbased service consists of five modules to drive efficiencies and eliminate waste, including supply chain and logistics management, well planning, spend monitoring, tracking of real-time bottlenecks and a performance tracking system that monitors operational key performance indicators, according to a press release.
According to a press release, the platform will be used in the procurement stage through the construction, completion and production phases. Tracking, planning and optimizing the well(s) through each phase provides the ability to reduce spend, eliminate waste, improve processes and better align all parties needed to deliver a well successfully. The service will be implemented fleetwide on Diamond Offshore drilling rigs, creating the industry’s first Blockchain Ready Rig fleet.
Jennifer Presley’s Drilling Technologies column originally appeared in the November 2018 edition of E&P.