By Julia Payne
LONDON (Reuters) – Oil majors and commercial companies can begin for the first time to finalize crude oil deals on a blockchain-based live platform, in a move that could revolutionize the market.
In recent years, commodity trading firms have experimented with similar schemes, as blockchain technology has the potential to dramatically reduce costs in an environment with razor-thin margins.
The London platform Vakt is the first of these companies to be published, with the shareholder Gunvor Group stating that it was launched on Wednesday, even if no operations took place that day.
Blockchain, the platform behind Bitcoin cryptocurrency, is seen by many as a solution to trade and regulatory 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 the BP oil majors
Initially these companies will be the only users of Vakt but access will be opened in January next year.
ABN Amro, ING and Societe Generale banks are other shareholders.
Vakt digitizes and centralizes what was once a mountain of paperwork shared among all the parties involved in every business. It will be connected to another platform launched at the beginning of this year, the Geneva komgo, which will provide funding including digital credit letters.
"Vakt is the logistic arm … Once an agreement is executed through our record book, it is pushed through Vakt.The next stage is financing and linking with komgo gives access to several banks," said Eren Zekioglu , Chief Operations and IT Officer at Gunvor Group.
komgo, which should be published before the end of the year, is supported by a consortium comprising 10 global banks and most of the Vakt shareholders.
The financing platform will target the whole spectrum of commodity trading, from oil to wheat.
The use of Vakt will initially be limited to contracts for the five rough grades of the North Sea that are used to set up Brent, a parameter used to assess most of world crude.
At the start of 2019, the platform plans to include US crude pipelines and barges of refined products such as gasoline in northern Europe.
"It's an exciting time," said Andrew Smith, Shell's sales manager.
"The collaboration with our colleagues and some of the main players in the sector is the best way to combine the skills of the market and reach 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)