Blockchain Oil and Gas | Episode VI | GuildOne

welcome to book rio webinar of blockchain in the oil and gas industry today we have with us james graham co-founder of guild one the company was founded in 2001 he is the president and ceo of the company he led emerging technologies including blockchain machine learning and artificial intelligence from pook's side we have rafael nasser professor at bukuria and leader on blockchain research isabella freshhoff phd student at deloitte school and researcher at the software engineering laboratory pauline hickey phd student tool at the computer science department and researcher at the software engineering laboratory and myself armando cavanaugh as the moderator please let me invite professor rafael nasser to make the welcome for us thank you uh i would like to say thank to good one and james for accepting the invitation to participate in this episode we have study guild one cases and we are really impressed with this case i believe that is one of the most interesting case in this industry and we are very glad to have you here james thank you uh you can share a little bit of your experience with us it's very it's very nice for us and cavan please it's up to you go ahead thank you for the invitation thank you have fun uh we suggest to the audience to address questions and remarks in book social media after the we publish the video of the event so please james graham uh have control of the event and go ahead use your presentation thank you very much great thank you very much just before i launch into the presentation i just want to thank everybody for their time the invitation and uh the gracious words about the company i appreciate that and hopefully we can form a dialogue and and get some good uh knowledge transfer going on here so i'm gonna give a bit of a presentation i'm just gonna shut my video because the network's been a bit weird so i'm going to close my video and share my screen so again thanks very much um it's been an interesting ride with uh with blockchain for our company we uh we're a 25 year old company but the last four years we've been focused a lot on blockchain and of course we've managed to do a few worlds first we'll get into a lot of that as we go through the presentation i think the important things uh to remember now is that we're still on the very beginning of this technology we're still at the at the forefront um adoption is happening i'm working with a lot of large companies um so should be a good uh good hopefully got a lot of good information to you guys and then we'll go from there so we see this opportunity to pursue a more frictionless future i.e to eliminate a lot of the disputes and eliminate a lot of the the friction that's happening between counterparties by using blockchain's inherent ability to to have a private and secure and trustworthy way of sharing the facts and sharing the value and importantly sharing the interpretations of the contracts amongst these counterparties so what we're seeing in terms of great demonstrated value is reduced general and administrative costs eliminated disputes and now this opportunity to distribute the value between the partners in a faster fashion into a real-time fashion that allows us also to continue to streamline operations when it comes to ap and ar processes and of course what i think is probably the most important factor when we talk about blockchain is to share that automation to share that ability to have counterparties be sharing business process as well as facts and as well as the transfer as value we actually are creating a business process automation that spans the contract divide we see those processes being incredibly streamlining through the digital transformation and blockchain allows us then to unlock additional value propositions by making sure that these counterparties are transacting directly by leveraging the smart contract uh automation we're reducing the complexity of all of these different line of business systems that's multiplied by the fact that every counterparty has their own set of systems and their own interpretations of the contracts and their own set of facts for each of the data points and all of those things don't really meet in the middle because everybody has their own processes for how they manage that data so our goal was to facilitate all this data sharing to improve the data integrity between the counterparties by using smart contract automation and therefore we could reduce transaction times and dramatically reduce the cost of all the audit and all the rework and all of the dispute reconciliation work that had been happening and that's how blockchain is going to unlock that tremendous value that companies like gartner have talked about and companies that bain have talked about which is annual savings of more than 35 billion dollars for the industry and 176 billion dollars of new value added by blockchain uh by 2025. those metrics start to expand to a global supply chain where we're seeing tremendous realization of some of the early promises that were made and we're talking about compounded annual growth of blockchain solutions in the industry of bigger than 80 percent so i think the most important thing to think about the expansion and the evolution of blockchain is that we're now starting to realize that the pocs and pilots have been completed now and we're rolling systems into production that start to equate to these types of metrics in the market and that's how we're going to actually achieve the adoption levels and adoption is hard for blockchain because you need to get all of the counterparties involved and of course for us we as a quarter shop executed some of the world's first transactions in the enterprise blockchain space and in the oil and gas space and we did that by leveraging technologies that we had put in place but also employing corda from the r3 which was at the time of banking network and our thinking there was that if it was good enough for the banks and good enough for the regulators it was good enough for us from a security and a privacy perspective we did those transactions in 2018 i'm going to drill into that in a bit gartner named us as a as a worldwide leader for blockchain in in oil and gas we then became partners of r3 and amazon as we moved into a more global position we did the first contract executions between industry leaders and we automated a lot of that work and subsequently launched some new solutions which got the the purview of the houston blockchain consortia and we started working with them on a series of of solutions that have been very material for us and you know there's one thing about the blockchain revolution is people say that it hasn't hit some of its value and that's true we haven't realized some of the early promise but i can tell you from our perspective it's allowed us to have very serious events and accomplishments that we wouldn't have had without that blockchain part of our business that blockchain evolution and that vision that we had so i think the more important things that i would pull out here is we were fastest growing company in canada um in 2019 we were at deloitte fast 50 fastest growing technology companies in north america and importantly for us our three the corda ecosystem invested in a financing with us and allowed us to continue the work against their platform so the blockchain revolution is having a lot of good value uh it's just you have to look harder than we thought you would have to at this point in time i talked a bit about the genesis transaction the world's first blockchain commodity royalty transaction and what i wanted to point out here is that talk a lot about the team sport that is blockchain and how one simple transaction in this case an oil royalty transaction between a royalty owner called prairie sky and a royalty payee called nal now both of these are own are large companies large public companies so of course we had a lot of insurance and a lot and a bank to work with us but the interesting thing is then you quickly see a very simple transaction to automate it fully in a blockchain context involves a lot of players an infrastructure player a bank for settlement a a blockchain platform us as the network operator and the application developer deloitte came in and did assurance on our smart contracts to warrant to these large public companies that they were actually doing real pioneering blockchain work and and again i like to point out that blockchain is then one of the ultimate team sports in that you're sharing the same set of facts the same contract interpretations the same data points with your counterparties and you need a private blockchain types of scenario there because there's no way that people are outside of our contract should have any part of our contract so we don't use public blockchain and again that r3 corda platform worked for us so we'll get into that but i think my real takeaway there was to do this right it is a real team sport and the other team that has become very important to us is of course the b4e blockchain for energy which is led by you know five of the largest oil companies in the world and with participation from five more companies that are more intermediate in size and there's a fundamental shift going on inside of their organizations where they're looking to not only leverage the digital transformation but they're looking to actually share their data with their customers along the supply chain with their customers their partners and of course their suppliers and to do that in any of these highly regulated industries you need a very private and secure and trustworthy way to share information and of course blockchain gives us all of those interesting and important features so the what we realized very early on as we were doing royalty transactions moved with the houston consortia into afe authorization for expenditure transactions and now working with the consortia on joint venture transactions is that the same railway the same basic network services that same cloud infrastructure that same settlement rails all of that was going to be required for all these different contract execution types so at that point in time we realized that it was akin to kind of building a railroad where each of the applications were different trains and each of the box cars were the different contract types that we were going to be running on these trains so our our natural design response to that sort of business challenge then was to create this blockchain network called the energy block exchange where we could run multiple use cases using the same network level of services in order to execute these contracts but then allow us to include different contract types and not have to hard code or recode our our solutions in order for them to affect these different contract executions so you know the houston consortium and us started with authorization for expenditure which is really how things are set in terms of working interest which is critical to so many oil and gas contract types esg and measurement of course is a is an increasingly important part of the equation here where we need to share measurement data through the supply chain with with various people and that of course includes now increasingly more and more of the financial uh world more and more of the investor world as we move towards these more environmental friendly standards as we move towards more scrutiny from outside the industry as we move to a more sustainable industry of course that esg is dependent on measurement joint venture contract execution of course the operators are responsible for sharing all the data but not all that data gets shared accurately or securely and oftentimes there's a lot of disputes that's borne from that so a natural for blockchain that the houston consortium is working on with us mineral rights is very interesting so a shared table and a shared ledger of how these rights are owned by our different parties royalties we've talked about in some detail but of course that's a kind of a function of a lot of these different things i.e you need good

measurements you need a good understanding of people's entitlements inside of that and then you need a nimble way to execute on those transactions and the way that of course we eliminate disputes in all those types of contracts is because we're sharing all of the facts blockchain again gives us that capacity to securely and privately share those facts and then road use allowance is a really interesting one wherein we found that the actual use of a road is a contracted entity in a lot of these spaces and it's not automated at all so again blockchain allows us to actually start to look at how these roads are being used and to how to account for that usage when we're calculating all of these different things in between these counterparties so we came up with the evx concept and then we we looked for opportunities to provide incremental value using again that same kit the same railway of ebx the same trains of settlement rails or of contract um consensualization rails and adding measurement data and adding these events that happen in the oil and gas space we started to look at all the different across the value chain and all the different types of of models and applications and and use cases that came forward and there are many there are you know the the list is longer than my arm but we've really focused on a few that really start to capture some critical value and i keep talking about you know the abstraction of how you need to kind of move um the business analysts away from core dev because if a technology requires hardcore coding to do every implementation of it you're going to be stuck and what we realized very early on is that blockchain was hard enough required enough counterparties and different users in the ecosystem of participants and it was also technologically you know had it had new models being rolled out so it was hard for the business to kind of consume it and we weren't we were overweighted on the technical response we didn't have enough sort of business people engaged so we responded to all of those early challenges of being a pioneer with building a platform of a smart engine templating engine that would allow us to accelerate these these templates and allow us to make all these use cases without coding and that was a very major inflection point for us because it allowed us to approach more business problems with the exact same kit that we had so we created an engine called contracts where we normalize the the you know the the requirements down to a series of validations and data inputs and formulae and calculations that are required for any different contract type and i think that that was really a really important step for us in understanding how we could apply blockchain to other problems without having to start again start from scratch and of course behind the scenes then on all of this stuff is you have the corda uh industrial blockchain and for us they've been immeasurable now you know we're partnered with them with r3 the the parent company of corda they're they've been so kind to support us in so many ways you know with with working capital and and with um you know great connectivity to other ecosystem players in oil and gas and in other industries worldwide and it again leverages the point that this is a real ecosystem play now this is more than just a one company solution again it really relies on a bunch of company so we found with them that they had a shared vision around how these business networks were going to form and be rolled into these industries and that's what we built our our solutions on top of and some of the interesting players there that continue to give us the comfort that we're dealing with you know the the most viable enterprise blockchain um offering is the growth of the ecosystem the amount of different types of financial instruments and and different types of use cases that have been encoded into corda and of course our our primary relationship with them as an early adopter has allowed us to have a relationship that affords us a level of support so it gave us a lot of comfort that the banking requirements around uh you know financial accounting data privacy data security uh the trustworthiness of these systems as a as a group of innovating technologists and data scientists in calgary we really wanted to partner with the world's best and by partnering with r3 and amazon and of course microsoft and deloitte are key partners with r3 there's a lot of real real good leadership but the important thing for us was to be able to have this platform that we could build on top of so architecturally we built a smart contract engine i talked about that on top of that on top of corda then we now have this templating and this acceleration capacity where we're very confident that we we can deal with 90 of the transaction types without coding and i think that was a great leap for us and then we build business networks on top of that ebx is one we have some other uh business networks going on on top of those business networks then so these would be the box cars and the applications are the smart contracts themselves and all of this is in service of a bigger problem here which is how do we actually transform a large industry so say that you understand and buy into the way that we approached it i can tell you we've come apart it very honestly but what are the goals what were we trying to achieve much less we talked about lower gna we talked about eliminating disputes we talked about sharing data over the contract divide we talked about sharing automation between companies but that really boils down to this concept of a distributed autonomous and an organized sharing of all of these things so i wanted to include this slide because it kind of talks about the evolution that is supported by blockchain here which is all the way from traditional manual processes that are stuck in these fragmented silos through a series of digitizations into reconciliations and automation and ultimately into smart contract automation to move us towards this concept that we can share our our tools and we can share our processes we can share our data we can also share these organizations how we assemble assets how we actually ascribe assets into hierarchies we start sharing that and allows us to get to a more automatable state and i've just got three some some real demonstrated value slides because in chasing these large digital goals now we're starting to see enough maturation that these projects have started to mature to a point where we can measure them with real roi and we can measure then and project what the industry-wide value potential for these are so you can see that we we've have these tremendous abilities with blockchain to replace some of these really hard what i call ditch digging uh digital ditch digging roles which is people manually entering data and whatnot and you can see how from a current state so this is a legacy state where in one of our companies there is 25 people involved just in royalty operation very reactive to what their partners are saying to them very dispute oriented very manual reconciliation and ultimately very inefficient they had 25 people involved in the payor and then you had another eight people involved in the payee just making sure on a month over my month basis that the contracts were being executed and we still weren't avoiding a lot of disputes so some of this stuff with it would even end up in the courts the transitional step as you start to introduce automation around the data and making sure that the internal uh data streams are start to be improved you can already get to a 95 efficiency factor just by reducing the amount of resources by starting to put automation into the reconciliation efforts and we saw that drop down to then only 13 people in the payor seven people in the payee with nine critical informations but this is where it really starts to take um value and really delivers core value is a 400 percent efficiency factor when you see a full implementation and you can see how the streamlining of this is now down to five people in the payor and the in five uh five people in the payee and you can see we've eliminated a whole bunch of contacts and we've been able to produce a an efficiency rate factor of 400 percent over when we entered and this is where the concept of a dow a distributed autonomous organized state really takes shape because it means that we're sharing now all of the really hard work in process with our counterparties so we don't have that reconciliation work to even consider so that's a fairly quick view i think that was about 30 minutes what i really wanted to summarize with is our experiences in enabling these processes what the value that we've seen delivered by it and then we'll get into a q a but i will tell you whenever we entered this and i've been working in master data management data stewardship total data quality projects for 25 years there's always this fragmented data inside of the company that's creating friction usually even internal to the company but more friction with their counterparties and then so across the ledger here we see that blockchain enablement allows us to transact directly with the same set of facts eliminating all that friction that legacy state is very resource intense intensive and there's a lot of redundancy and duplication inside of a company and even more so between the company and our counterparties blockchain allows us to automate those processes and allows us to create this frictionless transaction with the tenants of privacy security and trust baked in we have a bunch of paper-based processes and digitizing something in oil and gas should be more than just scanning it in and making it available you need to actually have the facts the conceptualization all of that recorded in a centralized or decentralized in our case way so for sharing with everybody which will enable these digital processes and instead of holding private copies of data we share validated data between the entitled people and that's an important point only people who are in the contract can see the data so we're taking those high levels of dispute to elimination of disputes we're taking those paper contracts with everybody interpreting into different line of business systems and we're sharing those as contract devices and that allow us to real time execute taking those high transaction costs and lowering them by into modest transactions or micro payments and service fees and we're taking very slow like 90 day transaction times down to instant exchange of data so that was a pretty good flavor for the things that we've experienced as we've implemented this blockchain as a as a company that's been able to work with some very progressive companies and at that point in time i think it's a good time to kind of get to a q a perspective excellent james and this last slide is a very nice the comparison between uh legacy and blockchain environments very very interesting very very good could you please uh stop sharing screen for us please good thank you and if you can come back to your image great so excellent thank you very much and now it's open for questions from participants um please isabella freshoff and pauline hickey do you want to start with questions sure um thank you james for your presentation really really nice so you mentioned that on the i'm not sure i think it was on the evx or on the royalty solution you mentioned that two public companies were part of the network so i'm interesting if um if it um what would be the difficulties what were the difficulties when integrating the government to the to the ledger and what other opportunities do you think this could could lead to um to call to um call like the government to participate on the blockchain experience so there's sort of two groups of answers that come to mind i think let me take the latter part first i think the regulators and the government agencies have the most to gain from blockchain and that is they work on behalf of the people's interests only the unfortunate part is governments are very very seldomly resourced like the companies are right so you know i can i can speak to a company like prairie sky or a company like nal that's that's owned by a company like manulife these large companies they have the latitude even in a commodity pricing challenge scenario like we have now they have the latitude to invest a lot in their in their line of business systems to invest a lot in their digital transformation and governments don't always have that i mean the two biggest problems with government from my and i've worked with governments on government jobs one is that we rarely have the amount of resources that we could get in the private setting in the private industry setting and the other is that government people generally think on a very short time frame they're in a kind of a two to four year thinking because they're worried about re-election and policy then changes more than their back-end systems so i think why that all all starts to isolate why governments have such a tremendous opportunity with blockchain is that the infrastructure that's put in between the companies to share data starts to get to a scenario under which we can use as a as the people's influence and the people's interests through the government they can monitor those transactions much easier than they ever could before so if you put a regulator node on a blockchain network and allow a data share with the government regulator then the government does not have to keep their own infrastructure their own and they've been very poor at keeping that infrastructure up to date so i think that's the important thing there and then the other you know you see it every day particularly now there's been a lot of challenged economy in oil and gas there's been a few companies that have become insolvent and in most jurisdictions particularly the ones that i've worked in an insolvent company will report their insolvency to the government but then the government doesn't know what to do for a while it takes the government 35 60 90 days to even understand what the implications of that insolvency would be and i mean that from an environmental reclamation perspective from a liability perspective and oftentimes then the populace is left holding the bag because the government didn't have this real-time awareness of who the stakeholders were in a given asset who the partners were in a given asset and when company x goes down well there's generally a joint venture with other companies and the and the governments don't have view into that in the blockchain world you can set up a smart contract that's data sharing where we don't have to share everything with the government i'm not an advocate for that either i don't think governments do a lot of things very well but i think the regulator function is very important that the government's effect so we can have a data a smart contract that actually shares say there's 30 data points and say there's four of them that the government should be able to see by creating a smart contract and embedding it into the execution that the companies are using then we're satisfying our compliance requirement and the government is real time aware of what's happening so those two things i think are very important now when we look at big public companies that are listed in exchanges there's a fiduciary level of compliance that is required and that's why we saw deloitte enter the first manulife their auditor is deloitte and they couldn't have us screwing around if you will like fooling around with their data stream and their transfers and their value and their assets without having this assurance from somebody like deloitte so what you see right now and some of the adoptions harder because we need to then comply to everything that the current legacy systems need to comply with but we also have the mystery of where the governments might land on some of this stuff so i think it's very important for blockchain pioneers to be engaged with those types of agencies like the light deloitte auditors to give us that cover to actually understand what we're trying to do and allow these big public companies to have that check mark that due diligence check mark okay so james thank you for your presentation and i have a more technical background and you say something about the infrastructure and my question is about that in guild one's blockchain network it nodes represent a party that interact with other members the network can these nodes be used by multiple users how are these users authenticate you know this question is more technical i know but i would like to to hear something about it so again i think the question kind of strikes into a couple of different things here one thankfully every transactor on a blockchain network does not need to run a node i mean that would be a serious adoption issue and it was for the first couple years right because the cost of ownership of a node is actually a lot higher than some of the you know lower interested parties could you know stomach particularly because they're still running some of their legacy gear so there's two kind of different types of ownership then that stride again into groups one is the node control that is a company that's at scale running their own node either externally on a service like amazon like we use or running it with it internally that's its own cost profile usually in that scenario from a from us from a user and profiling an authentication perspective you're integrated with their active directory or your ldap and those people are controlling then who has access to that node with that sort of structure and you have to and i think it's an important thing to remember that you have to integrate with enterprise services you can't write brand new stuff people are not going to replace their ldap directories and their active directories you need to leverage that but that only helps you for internal audiences so then another type of node that's really started to mature from an ownership perspective is an agency type node where you're running accounts for different people inside of your your contract ecosystem who aren't necessarily mature enough in their blockchain journey to run their own node or maybe they don't have enough interests to warrant it but the people who have the blockchain nodes want them on the network because they're counterparties and what we don't want to have is have to run a bunch of different systems for everybody so those agency nodes would be one node and then an organization like a consortius or interesting perspective there runs a node and then models a lot of the participants who don't run their own nodes as accounts so that's usually controlled right in the permission mechanism of the blockchain then so the same sort of permission control that you use internode you can use inter account depending on what blockchain platform you're using uh the beauty for us on that was we're using corda so all of the private permission stuff is baked in the gatekeeper you know the doorman who understands who's in on what contracts is baked into corda and of course signed off on by all those banks so that solved those two kind of problems with us which is how do these how do we keep contract security and privacy in place and then there's the third kind of model there where you're starting to see blockchain backgrounds back office blockchain but it's surfacing into an end user's wallet if you will or an account and for us that's been a lot of work where you have to again mature and use a lot of solutions that are deployed in our case when we started working on digital identity we realized that 98 of the user group for this use case that we were working on had smartphones and the people that were um basically the clients or the or the requirements definers realized that we didn't have to worry about the additional two percent so we were able then to use all the good encryption that happens on the android and apple platforms and happens inside of the pk pass infrastructure where you can actually send encrypted stuff to a phone and you can use the authentication and security services on that platform so i think the your question kind of turns into what are enterprise services that are available at the network level and of course with us amazon has a lot of really important uh security mechanisms in place what are security mechanisms that are available at the platform level in our case r3 their permissions their gatekeepers their door keepers what then are existing enterprise services like ldap and active directory that we can touch and leverage and then what do we have at the end point be it a smartphone be it a computer be it a server array what are services that we can use or integrate with because the last thing you want is the blockchain developer to vent a bunch of their value and we needed to move that target off ourselves and use the best scenarios that were available in the devices that we have to interact with that solves a bunch of problems for us then you get down to you know a more formulaic or a standard way of responding to a cyber threat or a security threat all right perfect thank you thank you james uh it's very neat to see your point about abstract the the hard things when you need to develop a really business case using blockchain technology and i and i want to know a little bit more how you are your business model uh about your solution the contracts the correct the smart change to to develop the the business solutions using blockchain it's an open uh framework uh you need to to develop a few uh how you can collaborate or in the center a little bit more uh the business model about this technology sure so i think you know when i think about abstraction in this context and it's very informed by us so i think one thing that particularly if you're technically oriented at all and the business models that formed around it there's a technology called java the java programming language is of course used by you know they say 90 of the data on the internet touches a java program at some point in time in its life right and the android operating system is built to spec almost exactly like java so all that object of inheritance and all that and java's java's real so full disclosure our team is all java heads i used to work for sun microsystems on their java evangelist side i would go to all of the big java conferences and talk about how the future of the world was java and also i'm from calgary alberta canada and the father of java dr james gosling is a calgarian who went to william aberhart my high school and the university of calgary so we kind of came by our our interest in java very honestly but the important thing to remember about abstraction in java was the business problem was how are we going to create a write once run anywhere type of scenario that is how could we have one code base that we could execute on all these different devices right and i think the answer to that the java virtual machine is probably one of the most important things that happened in modern computing where we were then able to by creating a canon ball or a piece of code that we could put on every device simplify the the life of the solution developer to have them writing in one language and now we have abstracted language like kotlin and scala that was a lot of our reason for going with corda is that it was a java virtual machine executed where we could use higher level code like kotlin or scala to affect our our work and then the other angle of that abstraction was okay there's that technical but then by being java developers for 30 years you start to see these abstraction patterns form then because you start to really be be into that end stack architecture and realizing you need to make discrete layers and the business model of java was always if we can roll it into all of these different deployments it's going to become very easy for this thing to commercialize which was very interesting from that perspective so when you look at blockchain you had a similar kind of problem you have all these different contracts living in all these different systems with all this different data points required for any of these different types of bindings so what are the data that we need to buy what's the data we need to bind together to make a contract actually execute by these people and how are they sharing that data now so we used a lot of our you know all of our senior architecture all of our senior dev all of those people are java minded people so architecturally bringing those same patterns into play and of course java is very much an enterprise pattern and you're going to hear a pattern forming in my parlance which is there needs to be more and more standard patterns less and less sort of mavericks and that's what adoption is about so we realized early on that the only way for us to actually meet those different requirements was to create that same context something that could live in between the blockchain platform and all these different use cases that would allow us to simplify our world so we called that contracts and then we worked long and hard on how that would need to front end for different user types like how we could actually create a template mechanism and you realize that that starts to get into other known ux ui it sort of deployment models so i guess it's leverage everything that you can and abstraction is key to modern computing right because nobody can be an export on this entire stack so the business model that start to form with us was okay we need to run this business network to make our own application works well what other applications could we run on the network and then importantly what other providers could provide applications so if we're you know it took a hundred years to standardize light bulbs right so for the first 100 years of the light bulb revolution you had to buy the right light bulb for the right socket for that you know and there was all these different vendors and standards we realized that if you have that same scenario in blockchain you're going to further minimize the adoption curve so we started developing a a platform that would allow other developers also to use our business networks and we had to abstract way then a lot of that complexity and allow people to have so then we started licensing that middleware and it it looks and functions a lot like middleware it's just on its bottom end it doesn't have an executing ip network it has an executing blockchain network good isabella ph rafael um you mentioned the that you created this template right so just a disclaimer i'm i'm actually a lawyer and paged in the law department so forgive me if i um ask something really silly from a technical perspective but when you develop this this template is it is it easy for an example if um in brazil we have different um royalties um legal provision agents would it be easy for us to use your template and adapt to our own reality is that possible well that is exactly the business problem that you have right so one of the things that i noticed and our team noticed when we were looking at the various different platforms and looking at different projects as they matured was there was a lot of hard coding going on and hard coding is really really hard on the concept of maintaining different implementations right so our entire business problem was exactly that we have over 180 000 royalty contracts in play on our legacy platform so we have this view of the world for what it takes to actually execute a royalty play so we used all that knowledge to inform the fact that you know anything might change the type of royalty might change the product will change the the asset itself that you're getting at cash flow will change the fractionalization i.e the fragmentation of the cash flow will change the reporting on how we what type of event will be used as a trigger to execute the contract will change and we knew all of that from our historical work of dealing with all this royalty acreage and royalties in different types of products and assets so that really informed that exact business problem that you're talking about really informed why we took this configured don't code methodology and why we created contracts was because we need to support you know you look at a regulator you know they support a whole bunch of different types of contracts they may look and smell like the same thing from one aspect or one perspective but they're very different from every other perspective so the what you ascribe is actually one of the the primary drivers for our architecture so um i'm also sorry um i'm also assuming that you need iot um sensors to collect those data yeah the regulators are not really requiring real time so you there's two questions that form from that one is there is increasingly a lot of value to the hardware devices that are rolling out into the field that are more and more sensitive more and more deployed more and more costly like cost effective but we don't have that kind of coverage in all of the legacy stuff so in a green field or a new asset it's really good to say well you can put all these new sensors out there but for most of oil and gas that's not really happening nobody's spending a lot to put a bunch of new sensors on old stuff so iot is burgeoning it's coming and as iot matures with blockchain yeah that that real time state that you're talking about is really really driven by the maturation of both of those which is having the ability to garner good devices in the field calibrated calibrated data flowing tasks now that said you do not need real-time data right now because most of the contracts execute on a monthly basis so even if we have inter day or daily or weekly they're not being used um because the assets all net down with the counterparties on a monthly basis so we spend actual time kind of dumbing our stuff down to make it inter integratable with the monthly process so that's the kind of two vectors there iot is the future as devices get cheaper as it becomes really easy to deploy them into even old assets rather than just new most of the iot work in oil and gas is kind of happening on very selected sandbox assets it's not really rolled out to full production so we still have a bunch of measurement devices in the field now that said there is also a standing measurement like directive 17 up here which is most of canada that dictates how much measurement you need in place and the companies haven't actually met their current regulatory requirement so i think my thing about iot is i can't wait because prominent data from the field it would be very valuable because most of the events that we execute contracts on are operator reported volumes measurement but right now you kind of have to take their legacy process as well and most of the contracts execute from the operator reporting from their legacy kit not the new stuff kind of have to flavor both of those i agree with you i think you're being forward thinking i think iot is a big part of the future and will start to take more shape as we go but currently right now to execute a contract you're dealing with a lot of legacy kit and more relates to to greenfields than brownfields so the old capex in london okay any other questions if they can i'm really confused about the the good ones logan uh you talk about and i'm i'm i'm uh uh understand the same the the the data is fragment uh to the different companies and you you use this logo one organization one one trust why one this is okay i think about i think that ultimately this concept of a single source of truth we've been talking about it for 25 years in oil and gas this has created master data management projects data stewardship total quality of data and what most of those projects have ended up being is you look at a river and then you dip your bucket in the river and you pull it out and you contemplate your bucket from their point forward until somebody says hey the river's flowing by you and then you go and you dip your bucket again and you contemplate the bucket this has been an analogy to what we have faced in terms of data cleanup and data provenance and stuff is that oftentimes they happen kind of independently of the flow of the data and what one organization and one truth is meant to address is that for the industry and in the industry i include all the service providers all of the vendors all the suppliers all of the contract operators all of the actual entitlement holders the real operators the royalty holders the governments regulators we all replicate the same data points on the same assets you'll have a well that's producing and everybody who has an interest in that well has a different picture of that well and they've all gone through their own you know usually most of them have gone through their own data cleanup projects and they think that well as dead on but the minute that they start interacting with their counterparty they realize they're out to lunch and maybe the gaps in your data so i think the other factor there is that the gaps in your data that are very expensive to address it's usually your partner who has that data so if you could come up with a way to have one set of processes rather than all these fragmented processes then you would really solve that problem once and for all which is one set of facts for that well one set of facts for that plan one set of facts for that pipeline one set of facts right so that's where the one really comes from and then i like the one but but but maybe the one industry or the one ecosystem i mean when you talk about one company i think it's the only one but but you have data flowing from different companies but it's very very nice the one is perfect yeah it's one ecosystem there can't be all these provincial regional jurisdictional truths but there needs to be one truth and this is a problem throughout as as digital technologies are maturing and being deployed and we see this across industries and across societies it's not that we're all recording the same thing and i'm not going to go too nerdy and get into quantum observers because there might not be anything called objective truth when you look at quantum but i'll just stick to the facts of a running system there should only be one reporting on a running system the minute there is more than one reporting you have more than one truth and that can't be right so quantum effects aside there should be ability to ascribe the same measurement data across counterparties and that's what i mean by one truth perfect perfect excellent please james please uh um uh you mentioned joint venture management uh among other companies in the exploration production uh phase and uh what are the main uh let's see features this company can have in terms of business vision uh big decisions are among them and the procurement decisions what what else you have well i think one of the key things where there's a lot of value in is the actual distributions um the operators are on the um you know they're regulated and under contract they are obligated to provide the operating data any joint venture contract well it's the operator of that joint venture who's more privy to the facts they're they're sitting hopefully in a in a scenario under which this facts are streaming to them and then they deploy those facts out to the world and isabel's iot is very interesting in the future state there because what we do now is we accrue values from all throughout the ecosystem all throughout the enterprise all throughout our field kit and we pull them into the analytics and we pull them into the magic spreadsheets where we do a lot of sort of additional math and because of that friction is born because the counterparties don't trust each other anymore you know because everybody interprets the contract to their value right but there's really only one contract but you're free to as long as you're free to interpret it the way that you want you're going to have these disputes so in jv where that comes into play is that i'm going to stop believing the operator and i'm going to start affecting my audit provisions and i'm going to start affecting all of my oversight that the contract affords me or if i'm a government i'm going to start saying you're starting to not be compliant and i'm going to start penalizing and therefore you see the only ones who win in that no offense is a bill but the only ones who win there are the lawyers right so i think the real opportunity for joint venture management is establishing how those facts are reported report them in a standard way and a ledger's a really good way to do that and make sure then that we hive off what set of facts go to the different counterparties but not have different entire reporting streams for everybody which is what happens now so by normalizing all of that into one set of processes you're actually eliminating a lot of cost as well so i think that's what's and then the other side of joint ventures of course and how we settle this stuff currently joint ventures are almost always the operator says this is what happened and here's your check well if i'm a receiver of that check i'm going to take the check but i'm going to over time say you know i don't think this is right and i'm going to come back to them in the blockchain world the spike is getting them to agree right once they agree though we have the mechanism under which that we no longer have to trust because we've replaced the requirement with trust with a system right and the minute we can agree on that system and agree on the contract interpretation i no longer have to worry that the joint venture operator is giving me a line of goods right and i no longer have to worry that my check that came out of that actually matches because there's a lot of reconciliation even between what the operator reports to you and what they pay for you there's a delta in there sometimes so again blockchain allows us to normalize all that noise down into a system where i no longer have to distrust my counterparty because i have a system in place and we cannot forget that lawyers are expensive to experience they are so i gave a lot of credo to isabel for chasing that career there's been a couple times in my career where i was making as much money as a lawyer but in i.t that's a spike in lawyers that's just a common incline yeah we still have time to do that yeah maybe i'll get another spike in you never know yeah that's right any other questions yeah i have just more one one more and as we we are talking about payments i would like to know what is the interface layer to fit money like uh i you know how is that a token converted to a fiat money how does the royalty royalty ladder makes the payments so this is one of my biggest evangelistic pounding on the drum and i've been doing royalty payments and working with some very even very progressive companies around digitization but they won't allow us to exchange the value in the ledger right because the promise here is that wow if your audit is all just go look at the ledger if your financial ifrs compliance is go look at the ledger if your government regulatory compliance is go look at the ledger wow that's a real interesting future right but the problem that we have right now is that we're integrating with really old systems in some cases so the the high water mark is this set of 650 smart contracts uh for royalties running between two counterparties they actually make us net down so at the end of the month then we net down the position so instead of doing incremental micropayments and sending them all over and accruing so the settlement model would be you accrue value on the ledger and then you have a settlement event because we can't settle every account right now because they can't account for all of that with their legacy accounting systems and you have to line up so the high water mark in terms of smart contract execution actually gears down a couple of levels of technology and we actually then have instructions from the ledger from a settlement event to write out efts so the bank settles the efp this is not our design this is just us needing to deal with the current scenario our design is to have tokenization of the settlement use a settlement rail in our case the quarter settler which is now being baked into the platform but settlement services that was the other reason why we decided to cozy up to a network that had 110 bank nodes on it is you need to offer settlement options it's not like one bank is going to settle all these transactions so i talked a lot about the railway one of the really important rails on the railway is the settlement rail and uh yeah so technically we can tokenize the settlement we can turn it into fiat cash if you have a bank but currently the customers of this stuff want it netted down and so their current their legacy accountants can actually consume it perfect perfect thank you so much you're welcome i have a question uh talking about real life based on your experience when you when you talk with companies to to to change the process to using blockchain uh which is the the the biggest challenges what do you think what what kind of when you say you you reduce the number of workers i i immediately think about the companies or the people inside the process uh don't don't to see this uh that's a great change not a huge thing i can imagine that but but you can talk me more the difficulties about the the real life in your experience right so i think a you nailed it so let's address the elephant in the room if the decision-making process so say you have an executive who's bought in and the executive says we really want to look at this blockchain stuff so you've got a man or a woman at the executive level who's champion championing you you've got you know some buy-in you roll in but then you hit a problem you hit a problem because you're going to be they that the executive class even the smartest among them even the lawyers is about the executive class isn't as connected to the operations as you would think in most cases in any company of any scale so they're going to put you on to a lower level down and even through middle management into the trenches where the stuff really works and to your point those people are going to be very protective so they're going to say well you know it does this but it doesn't do this or it doesn't do this or it can't handle our world our world's too complex and all of that so i've been doing royalties for 30 years but i've seen people who've been doing it for two years tell me there's no way our technology can handle and that's because they're worried about their jobs they're protectionists you know and that's a human nature man i get it i understand but so that really really denotes that you not only need that executive buy-in you need project champions who actually know where the bodies are buried right who know to counter a narrative like that to say well you know and then we talked a bit about greenfield and brownfield that's the other opportunity is uh those types of people are generally less bought into new asset they're usually bought into a brownfield asset something they've been running for a while and they think they know everything about it and they generally do i don't want to take away from them it's not like they're replicated in these systems but the co but you're right they slow down the process the other is definitely still the high level of education and awareness that you have to handhold um to get them through i mean the first first counterpoint is usually bitcoin we don't want bitcoin it's like no no it's not bitcoin it's like no no it's bitcoin i was reading about this right so there's a buzzword bingo kind of component around blockchain where people think they know what it is um and of course blockchain really isn't blockchain anymore we're talking about distributed ledgers whether they're a chain of blocks or not corda is not classically a chain of blocks you've got smart contracts which are really a piece of software that we have decided is the arbiter of this transaction or this data share and all of that gets bundled up under the concept of blockchain so the industry itself hasn't done ourselves any good by stretching blockchain over all of these you know previously discrete technologies and then yeah usually in the buyers there's somebody who thinks they know because their nephew has been mining bitcoin for the last 11 months what what blockchain is and oftentimes we're walking in and defending things like miners we require no mining on our networks right we have no exposure to mining but a half of our customers even at this point in time would probably still come and say yeah so what are we doing about the mining you know so you have to evangelize and and raise the level of awareness um that's why you know projects like yours and this is very important because the rising tide needs to rise all the boats from the decision makers through the implementers through the the benefit the benefit tours if you will um so i think the awareness is still really high for a software company to undertake when you have to tell them how to spell blockchain you know it's a bad start and there are scenarios where you're doing that there's just the level of awareness isn't where it needs to be because the technology itself is maturing to enterprise grade there's no question the last four years have pointed out that the more and more of these systems deploy the more and more they start to look at like an existing enterprise network an existing platform it's just an ip network with some additional protocol tied to it but that is not really well known yet so something very interesting when you have the champions not only one company but in the in the whole parties uh to discuss the the process the the process involving this this company you can you can think something really different than than we we have in our days with only one company viewing your data and your process i'm i'm very happy when you you put in the same the same table uh different peoples from different uh companies to to discuss the future of the process this is very interesting which with this technology i think uh this is one of the most interesting parts of the blockchain technology one in in your statement there i agree with you 100 and in your statement is inherent some of the challenge then because you have to deal with i kind of view it like a federalist versus a province in some cases because blockchain then needs to be the federal it needs to be federated across all of these different and the most effective um deniers or rejectors of this transformation are tied to their local truth right this is the way we've been doing it for 30 years so you've got to fight 30 of those if you want 30 counterparties you're fighting 30 local truths or local narratives about what's happening because you're trying to stretch something over here across all of it so that's part of the adoption challenge here is that you have to be right at an industry level they only have to be right inside of their office so that creates some traction many different true and and very dispute orientated as you said that's the way the industry is and people here people get born there's people that i work with who are bonused on collecting on you know collecting entitlements that weren't previously paid so what do you think their stake of the game to get it right is they don't want to get it right they want it to continue to execute in this half baked way because they get to come around on the back side and be heroes and get paid right so unfortunately we have to eliminate those types of roles to really have this concept of frictionless commerce that's right okay we appreciate having james garren with us today with a nice presentation talking thank you and please rafael nasir uh close the meeting for us okay thank you cavani again it's a pleasure uh uh to be back here to our uh blockchain webinars uh with one president solid application of smart contract in this uh industry or guys industry i really believe that james presentation was fighting uh new opportunities for executives and and and other professionals working in inside the organized oil gas company and trying to think how can you use blockchain or how can you use much control how can use dlt i think we we have a a very good conversation to to inspire them thank you again it's it's a pleasure for us receiving you and respect soon we'll have another episode i i believe i believe in in the in the early 2021 i think thank you again thank you thanks very much thank you isabella frederhoff paul hickey obvious rafael nasser and james graham thank you very much thank you thank you have a good good day for

2021-02-12 17:24

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