Trucking company Nuverra Environmental Solutions is becoming the industry’s leading test case for what blockchain can do for a truck-based supply chain.
At a time when many trucking companies are figuring out whether to try to adopt blockchain technology into their operations somehow, the (mostly) water-hauling company Nuverra is engaged in not one but two blockchain initiatives.
The energy-focused hauler has a three-year deal with one provider of blockchain technology. Separately, it just completed the first phase of a trial with a major oil company that was working as part of an oil industry-backed blockchain initiative.
Nuverra Environmental Solutions is based in Arizona but is active in most of the major oil basins in the U.S.
Its deep plunge into blockchain technology was highlighted in the past few days with the announcement of the completion of phase 1 of a pilot project between Nuverra and the Offshore Operators Committee Oil & Gas Blockchain Consortium, with the Norwegian state-controlled Equinor as the operating oil company that worked with Nuverra. The Consortium’s membership consists of some of the biggest companies in the world.
The pilot used blockchain technology to track record keeping for the water-hauling and disposal service that Nuverra provided to Equinor for five wells in the Bakken field, the North Dakota-centered producing area. A company called Data Gumbo provided the blockchain technology for the initiative between Equinor and Nuverra.
The other initiative has been ongoing since earlier this year. A pilot project turned into a three-year contract between Nuverra and Ondiflo, a Houston-based blockchain technology company. The blockchain service that Ondiflo provides for Nuverra deals with services other than water disposal, such as dispatching.
The Ondiflo-Nuverra initiative, which went from pilot program to three-year contract on April 1, involves both Nuverra and well operators.
“They’re definitely technology-hungry,” Rana Basu, founder and COO of Ondiflo, said of Nuverra, agreeing that the company is further ahead on adoption of blockchain technology than any other trucking company he knows.
Basu spoke specifically of Greg Tipton, the Nuverra CIO, who he said has been given “a lot of room to be able to make them more and more technologically able to do things.”
Tipton, in an interview with FreightWaves, said Nuverra operates about 350 trucks and hauls mostly water. It also uses third-party drivers for surge capacity.
The theoretical advantages that blockchain technology can provide a trucking company are numerous. It can make transactions “touchless,” without the filing or scanning of paper documents. The distributed ledger aspect of the blockchain means that the data uploaded to the blockchain is shared among all the members — who are on what are known as “nodes” — helping to eliminate disputes over data since everybody has the same information and there is no central database.
If a hacker wants to hack into the data, it needs to hack into every node on the blockchain. That gives the information stored on the blockchain an enormous level of trust, and data on it has been referred to as “immutable.”
Like all trucking companies, Nuverra faces the same issue that virtually all its peer group does: transactions handled through paper, delays in getting paid, and disputes over the actual size or timing of deliveries.
One example of where the pilot with Equinor and DataGumbo proved beneficial: the number of “tickets” approved when it disposed of water through a third-party operator of disposal well services. In the pilot, it stood at 85%. Although Tipton did not give a number for comparison with the 85%, he clearly was happy with the figure.
The process on the blockchain would grant approval on such data points as the amount of water picked up, the amount of water disposed, the time of the disposal, etc. once data supplied on a delivery was confirmed by all the parties on the blockchain pilot. “If our hauling ticket is within the [blockchain’s required parameters] ] it is auto approved without any human intervention,” he said. “This allows us to focus only on the disputed tickets.”
“What I liked about the business model is that it is a win-win for both sides,” Andrew Bruce, the CEO of Data Gumbo, said of the pilot with Nuverra. “The oil company has a win because they can make sure they pay for what is getting delivered. They have that contractual certainty.”
Meanwhile, Nuverra “gets paid for what is performed and they get paid on time,” Bruce said, because the blockchain speeds up the process. That has long been one of the promises of blockchain: that the sharing of data about transactions to all parties, with the data considered immutable, will accelerate the payment process.
Any gains in efficiency can fall to the bottom line. “We’re being asked by multiple trucking companies to look at this,” Bruce said. One area: transporting diesel to drilling facilities, with the prospect that if even 1 cent per gallon could be saved through blockchain technology, that’s a significant gain in a market with such tight margins.
In a prepared statement announcing the completion of the pilot program, Rebecca Hofmann, chairman of the OOC Oil & Gas blockchain consortium, said the pilot “proved that non-manned volume validations can trigger automated payments to vendors, and showcase the opportunities that exist for blockchain to reduce costs, increase efficiency, provide transparency and eliminate disputes in the oil and gas industry.” She said the results are “just the tip of the iceberg for the potential of blockchain in our industry.”
The OOC consortium laid out some specific wins from the pilot. It said the current process workflow was cut to one to seven days from 90 to 120 days, and the number of steps in the process was cut to seven from 16. The shared network validated 85% of the volume measured automatically, with the expectation that can be driven to 100% in the future. When the network was validated by the network, it automatically kicked off the invoicing process, “which reduces financial risk by giving assurance that payments coincide with field activity.”
Tipton said phase 1 involved ensuring all the data needed for the project could be gathered and aligned. Phase 2 will automate invoicing so that a bill sent by Nuverra to Equinor for payment will be a process completely handled by the blockchain once the necessary data is in the system. “This phase is building on the previous phase,” he said.
The OOC consortium’s role is to be a driving force in helping to move along blockchain adoption, Bruce said. “They’ve been taking the lead on what’s required from standardization, what’s required on the regulatory front, does blockchain work and is it ready for prime time,” he said. “So this project kicked off in part to answer that question for them.
While the OOC consortium initiative with Nuverra was limited to measuring water disposal, Basu said the Ondiflo deal with the company is covering a wider range of activities, including dispatching. The trucks in the field are working off an Ondiflo app, with the data from it loaded onto the blockchain.