• Thursday, March 28, 2024
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Improving NNPC’s supply chain through Blockchain technology

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Over the years, the Nigerian National Petroleum Corporation (NNPC) has had challenges with accounting for the nation’s oil revenues. There have been issues of transparency, corruption and leakages amongst many others.

There have been several attempts by various Governments to stem the revenue losses from NNPC and other agencies in the Nigerian oil and gas sector, unfortunately, most of those efforts have been unsuccessful. The lack of success in tackling the issues with the NNPC arises from the multidimensional nature of the problems facing the organization ranging from lack of adequate technology, human and managerial problems, bureaucracy, unstable government policies and a lot more.

According to Accenture, Blockchain solutions could further boost productivity and reduce cost in the following ways:

  Greater process efficiency. Blockchain improves accuracy in complex processes and helps reduce the need for governance. Smart contracts, for example, can be held in a blockchain transaction with party compliance confirmed through follow-on transactions, reducing third-party supervision and paper-based contracting, thus helping reduce cost and overhead.

Compliance. Visibility is essential to improve supply chain performance. The immutable record of transactions can aid in product traceability and asset tracking. The distributed ledger can record product and asset attributes, and allow permissions for specific parties to view. A company could provide, for instance, the origin of raw materials to minimize the chance of introducing conflict minerals. Clearer visibility could also offer more reliable data for insight and better business decisions.

  Data transfer from IoT sensors. Blockchain could be used to track the unique history of a device, with the distributed ledger recording data transfer from multiple sensors. Data security in devices could be safeguarded by unique blockchain characteristics.

The blockchain technology though not a panacea for all the problems faced by the NNPC, can greatly increase the institutions transparency and efficiency. The blockchain ensures that every time products change hands, from lifting crude to refinery to sale, the transaction is documented in an indelible transaction record that is stored in the blockchain. This would dramatically reduce delays, costs, and human error that plague transactions today.

In addition, blockchain can improve the following tasks:

        Recording quantity and transfer of assets like trailers, containers and pipeline products as they move between NNPC and partner supply chain nodes

        Tracking purchase orders, change orders, receipts, shipment notifications, or other trade-related documents

        Verifying or certifying of physical products; for example determining if it is PMS, Diesel, or Kerosene

        Linking physical goods to serial numbers, bar codes, digital tags like RFID, etc.

        Sharing information about drilling, refinery process, delivery and much more with suppliers and vendors

Regardless of the application, blockchain offers NNPC the following advantages:

        Enhanced Transparency. Document product’s journey across the supply chain, revealing its true origin and touch points, engendering trust and eliminating bias.

        Greater Collaboration and Scalability. Virtually any number of participants, accessing from any number of touch points, is possible. The information on the blockchain once written is indelible and only those with permission to add transaction and information can do so, others with access can only view information recorded.

        Better Security. A shared, indelible ledger with strong encryption and security rules would greatly enhance the audits of internal systems and processes.

        Increased Revenue. This will occur invariably through significant reduction in revenue leakages.

Conclusion

The Blockchain is increasingly being used around the world to make complex supply chain transactions more transparent, more collaborative and more profitable. It’s important to note that there are still challenges in making the blockchain mainstream in supply chain due to the need for improved governance structures, regulations and standardization.

However, the institutions at the forefront of incorporating the blockchain in their supply chain are already reaping huge rewards and the market place is rapidly transforming. There will be winners and losers with the blockchain technology, but inaction is not the way to go as playing catch up would be expensive, rather it’s better to be part of the conversation as it will help shape the future.

Marco Dunand, CEO of Mercuria, an advocate of blockchain technology is quoted to have said that “The energy industry will have to digitize [sic] more and more in oil production, refining, shipping. So traders will also have to participate. It is a pre-archaic process. So introducing blockchain will allow to pass title from buyer to shipper to seller without going through massive paperwork of bills of lading.”

Contributors to this article are; Dr. Olayinka David-West, Lagos Business School, and Tunde Ladipo, a Blockchain enthusiast.