Its very common among oil and gas companies to buy products from each other and do a reconciliation based on the exchange contracts. For doing an accurate reconciliation, it is important to track the volumes accurately for reconciliations. The volumes can be sold from terminals, refineries or bulk storage locations and could be transported using various methods (e.g., trucks, pipelines, barges, ocean vessels, etc.). In most of the cases, the process to capture the accurate volume is manual along with the associated paperwork [e.g., permits, custody ownership and transfer, etc.] are manual and not centrally within one company.
By leveraging blockchain based solution, it could be possible to set up exchange agreements as smart contracts to track custody transfer and bring transparency into the reconciliation and settlements process. Participants can simultaneously view and share data on the location, volume, quality, and status of transactions.
The distributed ledger can also bring other participants, such as shipping companies, to update delivery information. Subsequently, payment status can be shared across a single shared ledger, helping to reduce transaction time, duplication of documents, and authentication of volumes among all partners through improved transparency and data sharing.
Through the use of smart contracts, we can now replace paper and complex legal agreements that are cumbersome, difficult to transfer and can be hard to track for the average person and even for sophisticated investors. Our solution for commodity investing (mainly in oil) would be to switch to a digital system along the lines of Bitcoin but linked to an asset. This solution is the PERMIAN Token (XPR). Imagine a vault of oil barrels. The oil barrels are owned by ""Oil-owner Inc."" and the vault is owned by ""Vault Inc."" Vault Inc. has a spectacular reputation and third-party auditors who verify the amount of oil barrels in its vault. Oil-owner Inc. could offer a digital token to the public that represents ownership of the oil barrels and through a smart contract with Vault Inc. maintain a public off-chain registry that relates fractional interest in the gold with the tokens. For every token sold, Oil-owner Inc. transfers ownership to Vault Inc., who holds it on behalf of the token owner. Vault Inc. guarantees redemption of the value price of oil barrels by anyone who can prove ownership through a digital signature. Oil-owner Inc. can take advantage of the fact that Vault Inc. is trusted (and audited). Owners of the tokens rely on Vault Inc.'s representations and not on Oil-owner Inc. (even though Oil-owner Inc. is the token issuer). One of the main advantages would be that buyers of the tokens could know that they are the only person who has received the token, whereas a buyer of a paper certificate has no way of knowing that the same certificate hasn't been sold to multiple people.