Oil majors and trading firms can start finalizing crude oil deals on a
live blockchain-based platform for the first time, in a move that could
revolutionize the market.
Commodities trading firms have piloted similar schemes in recent
years as blockchain technology has the potential to drastically cut
costs in an environment of razor-thin profit margins.
London-based
platform Vakt is the first of these to go live, with shareholder Gunvor
Group saying it was rolled out on Wednesday, although no trades took
place that day.
Blockchain, the platform behind cryptocurrency
Bitcoin, is viewed by many as a solution to trade and settlement
inefficiencies, as well as a way to improve transparency and reduce the
risk of fraud.
Vakt was created in 2017 by a consortium that includes oil majors BP (BP.L) and Royal Dutch Shell (RDSa.AS), Norway’s Equinor, global energy trading firms Mercuria Energy Group and Koch Supply and Trading, as well as Gunvor.
These firms will initially be the only users of Vakt but access will be opened up in January next year.
Banks ABN Amro, ING and Societe Generale are other shareholders.
Vakt
digitizes and centralizes what was previously a mountain of a paperwork
shared between all the parties involved in each deal. It will be linked
to another platform launched earlier this year, Geneva-based komgo,
which will provide financing including digital letters of credit.
“Vakt
is the logistical arm...Once a deal is executed through our book of
records, it gets pushed through Vakt. The next leg is the financing and
the link-up with komgo gives access to several banks,” said Eren
Zekioglu, Chief Operations and IT Officer at Gunvor Group.
komgo,
which is due to go live before the year end, is backed by a consortium
including 10 global banks and most of the Vakt shareholders.
The financing platform will target the full spectrum of commodities trading, from oil to wheat.
Use
of Vakt will at first be limited to contracts for the five North Sea
crude grades that are used to set dated Brent, a benchmark used to price
most of the world’s crude oil.
In early 2019, the platform
plans to include U.S. crude pipelines and barges of refined products
like gasoline in northern Europe.
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“It’s an exciting time,” Andrew Smith, Shell’s head of trading, said.
“Collaboration
with our peers and some of the industry’s key players is the best way
to combine market expertise and achieve the scale necessary to launch a
digital transaction platform that could transform the way we all do
business.”
Reporting By Julia Payne; Editing by Kirsten Donovan
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