A consortium involving Shell, BP, and Statoil is working on the development of a blockchain-based energy commodity trading platform, along with three large commodity traders-Gunvor, Koch Supply & Trading, and Mercuria, Reuters reports, citing the consortium.
The platform, which has financial backing from Dutch ABN Amro, ING, and French Societe Generale, should launch by the end of next year.
In January this year, Mercuria, in partnership with ING and Societe Generale, announced it was preparing the first oil trade using blockchain technology. The trade involved an African crude shipment to Mercuria shareholder ChemChina. When he announced the test at the Davos World Economic Forum, Mercuria's CEO, Marco Dunnand, said, "The energy industry will have to digitalize more and more in oil production, refining, shipping. So traders will also have to participate."
A month later, Mercuria reported on the success of the test that used its prototype Easy Trading Connect platform to sell the African crude cargo three times on its way to China. The transactions involved the buyer and the seller, an agent, and an inspector, all of whom took part in the deal via the platform.
The purpose of digitizing commodity trading is to save costs as well as time, and to simplify the whole process of trading. As a senior ING executive said in February following the successful test trade with the Mercuria shipment, "The commodity finance industry is hampered by nature by inefficiencies and outdated procedures. By applying blockchain technology, we expect that we can eliminate a lot of these, making the overall process faster and more cost effective and the tests we have been able to carry out have proved this."
Blockchain is particularly well suited to this purpose: the distributed ledger technology can-potentially for now-replace a complex clearing and settlement procedure involving an often-cumbersome amount of papers that need to be distributed among customs officials, cargo agents, and surveyors, and on top of that the carrier of the cargo is required to issue letters of indemnity if these documents are not processed in time.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More