Blockchain and its Big Impact

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Blockchain in the chemical industry

Like the oil and gas industry, the chemical sector is also experimenting with blockchain technology.Arun Samuga, Chief Technology Officer, Elemica elaborates on three factors regarding the advantages of blockchain in the chemical industry – Capital intensive manufacturing, operations and maintenance; need for end to end visibility into their supply chains; and recurring contract negotiations and need for creative financing.

• Capital intensive manufacturing, operations and maintenance

In addition to setting up and running the facilities, there are frequent mergers and acquisitions in the chemical industry. As such there is a need for spin-offs and managing shared resources between the parent and some aspects of the child companies. Blockchain technologies provide the best levels of privacy as it relates to the evolution of parent companies and their spin off. Also, the history of evolution can be maintained through immutable ledgers. This reduces unnecessary expensive human actions and enables realisation of better returns on heavy capital.

• Need for end to end visibility into supply chains

The transformation of products from petrochemicals to basic chemicals to specialty chemicals to distributors (intermediaries) to OEM manufacturers is a very long journey that goes through multiple buy, sell, make and deliver cycles. Similar to the oil and gas industry, this poses a significant challenge in terms of end to end visibility at every stage. Different participants in the supply chain can trigger participation through a block chain solution if their activities are modeled through distributed ledgers and smart contracts. This makes supply chains more efficient and more tolerant to risk by enabling end to end visibility.

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• Recurring contract negotiations and need for creative financing

Like the oil and gas industry, conversion of raw materials to outputs achieved through manufacturing is supported by procurement, logistics, sales and marketing. As such there is a need to establish trust among various parties to orchestrate the flow of material, information and finance. There is tremendous amount of time and effort spent on creating and enforcing contracts, auditing payments, reconciliation and legal proceedings. Blockchain technology fundamentally enables a trustless environment with distributed ownership of data. If data or assets can be tokenised, they can be used for automated governance through smart contracts and for transfer of finances domestically and across borders thus allowing producers to focus on what they do best i.e. produce high quality goods while not investing effort in contracts and financing.

The future of blockchain in chemical process industries

Blockchain is slowly gaining ground in other segments as well as industries. The many technology experts across the globe unanimously agree that the potential of blockchain is huge. Samuga mentions, “Blockchain technology is going to see a similar growth cycle like the way the Internet did. The technology will go through an evolution from transferring money to transferring value with algorithmic enrichment. The possibilities of transformation for social and business processes are limitless as it demands a fundamental mind shift from traditional constructs to one that is driven by true collaboration.” Sood adds, “At this point, we do not even know what the potential of blockchain is. Many of the current concepts are simply taking old processes and porting them to a blockchain concept. There is enough capital allocated and enough smart people working in the space that in all likelihood we will have complete reimagining and redesigns of the value chain and see completely new models of working.”

Blockchain has already achieved a significant response from both the oil and gas as well as the chemical industries and from here on, technology leaders will be keen to explore many more dimensions of the industry. After all, blockchain is all set to transform the industry like never before!

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