The Kingdom of Saudi Arabia isn’t what it says on the tin. We quickly realized that over several weeks in the country meeting with technology startups and local Saudis who are overwhelmingly friendly towards visitors. Like any country, there’s the good and the bad. The roads are some of the most dangerous in the world to drive, and that’s not just because they’re full of women drivers now. Our female Uber driver speculated it’s because the country is a melting pot of cultures who all drive differently, and many immigrants have never driven before.
Gone are the religious police and mandatory dress code for the ladies. The country’s youthful ruler, MBS, is all about making the country a tourist destination. (The Saudis recently held one of the biggest music festivals in the region – the MDL Beast Festival – with 400,000 attendees.) While tourism may be stalled now due to “the Rona,” the Kingdom is still investing heavily in another industry they want to diversify into with their ginormous stash of oil dollars – technology. One of their recent tech investments is a company called Data Gumbo which hopes to build the largest industrial blockchain network in the world.
Smart contracts, powered by blockchain technology, are pioneering a new approach to commercial relationships.
About Data Gumbo
Founded in 2016, Houston, Texas startup Data Gumbo has taken in a total of $15 million in funding to develop GumboNet, “a massively interconnected industrial blockchain network that delivers transactional certainty to business relationships.” Built from the ground up, their blockchain solution is ideal for heavy industries like oil & gas, construction, and mining. It’s no surprise that Data Gumbo’s first target industry is oil & gas, not because they’re headquartered in a state with more than 187,00 oil wells, but because that’s the founder’s forte.
Data Gumbo Founder and CEO, Andrew Bruce, comes to the table with extensive experience innovating in the energy industry, He created the NOVOS product, a first-of-its-kind semi-autonomous drilling system, and then he founded Data Gumbo after spotting an opportunity to eliminate a sizable cost inefficiency between an oil supermajor and one of its suppliers. Having contacts in the energy industry may be what helped him bring on two notable investors with deep pockets. Lead investors for Data Gumbo include Saudi Aramco, the world’s most profitable company, and Equinor, a Norwegian state-owned multinational energy company with 2019 revenues of $64 billion.
Investors don’t just bring money to the table, they’re sometimes a startup’s first client. Earlier this summer, Data Gumbo showed some of the world’s biggest oil companies their capabilities by successfully completing the first industry-wide use of a blockchain-native network for produced water haulage.
Blockchain for Oil Wells
Blockchain For Energy is a consortium of oil and gas companies that includes names like Chevron, ConocoPhillips, Equinor, ExxonMobil, Repsol, and Shell. Together, these companies have identified dozens of use cases in the oil and gas industry for blockchain technology. The successful completion of its first pilot leveraging blockchain technology was a GumboNet implementation at five of Equinor’s oil wells in the Bakken field of North Dakota.
The life span of an oil well is based on the active years the well is producing, and that average is between 20 to 30 years. Most people probably don’t know just how much water can be produced by oil wells (it’s conveniently called produced water), all of which needs to be disposed of as industrial waste due to its high salinity. There are companies that do nothing but haul water from oil wells and dispose of it, and that process is where Data Gumbo applied some blockchain-powered automaton – from field reading to invoice payment. As each truckload of water was disposed of, the platform was recording the event, and issuing an invoice for the service. The impact of this new process shows just how bad the old process was.
The picture’s a bit blurry, but let’s respect the poor marketing intern who spent two weeks creating it – Credit: Data Gumbo
Numbers don’t lie, at least not when you’re using a distributed ledger. The process workflow used to take 90-120 days to complete. With GumboNet, it takes just 1-7 days, and requires zero manual intervention. The result was a 25% – 35% reallocation of resources versus current business process for operator and trucking company.
The produced water haulage use case is just one of many identified by Data Gumbo which believes that blockchain should be a part of any new well build. Smart contract management alone can have a noticeable impact to the bottom line when applied at scale.
Smart Contract Management
In our past piece on Using Blockchain for Commercial Real Estate, we talked about how digitally signed smart contracts using blockchain technology can automatically execute transactions. Once a smart contract is issued, invoicing and payments can be automated. That’s a compelling value add when you consider that good contract management can increase profitability by up to 9% of annual revenues.
As tough times befall the oil industry, we’re worried our two energy dividend champions – Chevron and Exxon Mobil – won’t be able to continue increasing dividends. All oil companies are probably hurting right now, and any technology solution that saves money will be welcomed with open arms, especially when there’s no setup fee and implementation takes just 90 days. For large capital-intensive companies that are highly regulated, traceability and transparency will be welcomed by senior managers who can always use some more CYA.
In our past article on real estate blockchain startup Othera, we learned how the company’s founder spent five years speaking to more than 500 companies operating in the residential mortgage market to figure out what problems needed to be solved with blockchain. Having domain expertise seems critically important to getting a blockchain startup off the ground, and Data Gumbo appears to have plenty.
Blockchain started out as a solution looking for a problem. Like every other disruptive technology, distributed ledgers were hyped to the moon before everyone forgot about them to focus on purchasing worthless initial coin offerings. Today, blockchain is slowly climbing up Gartner’s Slope of Enlightenment as domain experts are hastily executing under the radar to address big problems in industries where change is slow and you need some real contacts to get things done.
We’re presently holding two energy stocks – Exxon Mobil and Chevron – in our 30-stock dividend growth portfolio. While both stocks have been crushed lately, our investment in the world’s biggest renewable energy has profited handsomely. Find out which stock that is in “The Nanalyze Disruptive Tech Portfolio Report,” now available for Nanalyze Premium annual subscribers.
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