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Chevron, Total, Reliance Join Commodities Trade Blockchain Platform

Chevron, Total, Reliance Join Commodities Trade Blockchain Platform

Reuters reports that Chevron, Total and Reliance have joined a growing list of mainstream energy bigshots eyeing blockchain technology to streamline the commodities trading industry. This adds to BP, Royal Dutch Shell, Equinor, Gunvor, Mercuria and Koch Supply & Trading, who are also backers of the same platform called Vakt.

Historically, the logistics involved in commodities trading lacked elegance; with tons of paperwork that has to be managed by the individual parties involved in the transactions. However, sights set on the distributed ledger technology by a growing number of stakeholders within the oil and gas sector reveal an opportunity to scale processes involved in the value chain.

According to the article, blockchain is described as a technology that provides a “solution to trade and settlement inefficiencies… improve transparency and reduce the risk of fraud”.

A report in 2016 reflected on the summit held by the Group of Eight (G8) highly industrialized nations to include Canada, France, Germany, Italy, Japan, Russia, the United Kingdom, and the United States who drew on the conclusion on the necessity to establish transparency in order to fight corruption in the sector at the political, social and economic level. The report further noted that “as noble as the concept may be, when it comes to implementation, the political commitment to transparency seems to fall short of its aspirations”.

Blockchain has the ability to cut through the political inefficiencies thereby stem the tide of corruption that impedes transparency in the oil and gas sector – across borders – and reconstitute stakeholder commitment to a wholesome economy.

In adopting emerging technologies to address some of the problems plaguing the industry, Total’s head of trading and shipping Thomas Waymel said, “Total has been supporting industry initiatives to digitize cargo post-trade processes for some time… [we] view them as a major step forward towards safer, faster and cheaper logistical operations.”

Last month, Abu Dhabi National Oil Company (ADNOC) revealed that it is exploring the use of blockchain in its oil supply chain. Digital Unit Manager Abdul Nasser Al Mughairbi said that it could be “the first application of blockchain in oil and gas production accounting anywhere in the world”.

This year may see more industrial scale application of the distributed ledger, especially in areas desperately in need for better data coordination/validation, transparency and “dumping of paperwork” processes among inter-dependent systems across organizations in a value chain.

 

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Shell, Equinor, BP to Use Blockchain for Energy Trading

Shell, Equinor and BP will be using the blockchain-based platform Vakt for energy trading, with operations on the platform to go live by the end of November 2018 in the North Sea oil fields. The purpose of using Vakt is to move energy trading from cumbersome paper contracts to digital smart contracts. Cryptocurrency will not be used for the trades but the deal recap, contract, confirmation, logistics, and invoicing will be recorded on the blockchain.

Shell is based in the Netherlands and has an annual revenue of USD 300 billion. Norway-based Equinor records annual revenues of USD 60 billion and BP USD 245 billion. Combined, these energy companies have assets of nearly USD 800 billion, approximately eight times the Bitcoin market cap.

Blockchain is known to shorten and strengthen supply chains, by providing a cryptographically secure, immutable, and transparent ledger. Inefficiencies and errors in the energy trading process will be easy to spot and correct, and fraud will be reduced due to the transparency. Overall, energy trading on the blockchain will be more reliable and efficient than with paper. It is expected that energy trading fees will drop 40% once the blockchain platform is implemented.

Vakt is a post-trade management platform that is meant to digitize the commodities trading industry. Aside from the major oil companies backing Vakt, the banks ING, Societe Generale, and ABN AMRO are on board, as well as the independent traders Koch, Mercuria, and Gunvor.

After the integration of energy trading in the North Sea oil fields in late 2018, Vakt will look to integrate barges, waterborne energy markets, and United States crude pipelines in 2019. Additionally, in 2019 Vakt expects its first licensees and shareholders, implicitly indicating the door is open for other energy trading firms to join Vakt.

 

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BP Tests Precursor to Possible Blockchain Collaboration

Oil and gas giant BP has confirmed that it has been testing what it describes as ‘internal tokens’, while also being open to partnering with blockchain startups holding initial coin offerings (ICOs).

The technology director for BP’s digital innovation organization, Julian Gray, spoke on the subject at the recent Blockchain Expo in London. He noted that non-financial enterprises appeared to be more inclined to adopt blockchain technology than the financial services sector.

While Gray acknowledged that BP had not pursued public blockchains, he said ”that doesn’t mean we won’t”. Speaking on the internal token testing, he explained, ”We have done proof of concepts using tokens internally, transferring value.”

While BP had no particular partnerships in mind, Gray said that he ”wouldn’t be surprised” if they did in the future. He described himself as open to collaborating with startups holding ICOs, offering his well-funded innovation department for partnership.

This could be the best way for BP to pursue blockchain technology, as he admitted that internally, there was still a lot of education needed on the subject. Even so, the attitude towards blockchain in the company is softening from the once held view that it was ”hacker territory”, as Gray described.

Moderator Lewis Cohen, a partner at law firm Hogan Lovells, commented that it was interesting to hear the technology director from a company like BP speak so positively and openly about the subject matter.

Gray responded: ”The technology is out of the gate and it’s clearly going somewhere and at some point, we will interact with it”. He did stress, however, that all of the points discussed were of his own personal opinion and not that of BP.

The financial services industry have been far more resistant to ICOs and public blockchains than the wider sphere of enterprises. Even NASA recently made headlines for researching the improvement of deep space travel utilizing the Ethereum public blockchain.

 

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