Oil Majors, Traders and Banks Team Up on Blockchain Platform

LAGOS (CAPITAL Markets in Africa) – A group headed by some of the world’s biggest oil producers, trading houses and trade finance banks will develop a blockchain-based digital platform to manage physical commodity transactions.

The group’s members, including producers BP Plc, Royal Dutch Shell Plc andStatoil ASA; trading houses Gunvor Group Ltd., Mercuria Energy Group Ltd. and Koch Supply & Trading; and banks ABN Amro Group NV, Societe Generale SA andING Groep NV, will form an independent venture to develop and operate the platform, they said Monday.

Blockchain is a ledger-based digital technology for managing trades and transactions. It has been touted as potentially saving the commodity-trading sector hundreds of millions of dollars a year by reducing costs associated with traditional paper contracts and operations documents. Yet consensus among industry players on a common digital platform has been a stumbling block.

The new venture, expected to be operational by the end of 2018, “intends to lead the migration of all forms of energy transactions data to the blockchain,” the companies said in a joint statement. By using a shared technology, the platform will improve data quality, strengthen security and increase the speed of settlements, while reducing costs, they said.

Commodity-trading houses, as well as oil producers and their trading arms, conduct thousands of resource transactions each year financed by short-term loans from trade finance banks. In Switzerland, home to the trading operations of many of the top independent houses including Vitol Group and Trafigura Group Ltd., as well as Gunvor and Mercuria, the sector represents about 4 percent of gross domestic product.

Bank Finance
Dutch banks including ABN Amro and ING, as well as France’s SocGen and BNP Paribas SA, have been traditional lenders to the commodity trading sector.

The new venture follows an initiative earlier this year, led by ING and including Mercuria and SocGen, to test a blockchain-supported transaction shipping a cargo of African crude oil to China.

“Sharing one vision gives us a great opportunity to transform processing in the energy trade commodity sector,” Anthony van Vliet, ING’s global head of trade and commodity finance, said in a separate statement.

Other industries are also exploring blockchain-based trades. In power and gas, utilities from Enel SpA to RWE AG will start live trading based on blockchain before the end of the year following tests, developer Ponton GmbH said in May.