Blockchain Tokens Introduced for Oil and Gas Investment

By The Maritime Executive 11-20-2018 06:13:00

Blockchain technology is being introduced to oil and gas investments by Canada-based PermianChain Technologies. The company is introducing the Permian Token (XPR), a crypto asset-class that will underpin holding rights to the value of potential but undeveloped oil and gas reserves.

Trading oil and gas is currently complex, slow and fundamentally inefficient, says Permian. Agreements are cumbersome and difficult to transfer without adding costs, and there are so many different steps involved in the process of getting oil and gas from upstream through mid-stream to downstream, that the knock-on effect of delays at any point can be significant and costly.

The levels of complexity and inefficiency mean that many potential investors are reluctant to involve themselves in the market, reducing the sector’s potential liquidity and value. 

The Permian Token’s system of smart contracts is intended to replace these complex agreements using the PermianChain. XPR is expected to reduce investors’ liquidity issues by creating a tradable crypto-asset on a permissioned-access trust-protocol. The smart contracts will also remove a large proportion of the administrative and brokerage burden from oil and gas suppliers, which could turn marginal fields into profitable ones, says the company.

“Many private oil and gas opportunities are structured with an upfront fee due to their exclusivity and inaccessibility,” says Mohamed El-Masri, Co-Founder of PermianChain Technologies. “Advisers and brokers take a proportion of the profit simply for placing investors’ money in the deal, which means charging higher investment costs to cover administrative and brokerage tasks, rather than helping the project itself. 

“It also means that the offering company’s incentive is often to fill the deal quickly to protect their balance sheets in the short-term. There are currently over 1.6 trillion barrels of potential oil reserves globally. The Permian Token helps public organizations and private sector oil companies use them more efficiently.”

There are already approximately 250 million barrels of potential oil and gas reserves planned to be listed on the PermianChain network, says Permian, and the company has formed partnerships with a number of organizations including the Gulf Energy Corporation, Battiest Energy and KaspianInnovations. More than 30,000,000 XPR tokens have been pre-booked so far. 

The firm is working with King & Spalding, a global legal specialist, to have XPR issued as a regulated crypto-asset.