A BP, Shell and Statoil-backed project to modernize physical energy post-trade processes using blockchain technology is prompting huge market interest, Chief Operations and IT Officer at Gunvor Group Eren Zekioglu said in an interview.
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The aim is to help companies move away from traditional and cumbersome paper trading contracts and operations documentation to digital smart contracts. This would cut costs, reduce the risk of errors, and make back-end trading operations more reliable and efficient.
Gunvor is one of the consortium partners in the project launched last November, which also includes fellow trading houses Koch Supply & Trading and Mercuria and banks ABN Amro, ING and Societe Generale.
"The amount of interest we've seen since the launch has been overwhelming. The biggest names in our respective industries have all contacted us, expressing an interest in being part of this movement," Zekioglu said.
The oil-trading focused consortium said at the launch that it wanted eventually to open the platform to the whole commodities trading industry, pending approvals, as it would only work with widespread adoption.
A new London-based company called VAKT is to develop the platform, which is planned to enable secure, smart contracts and authenticated transfers of electronic documents.
"From being a participant, a user, or even an investing partner, the market has expressed its support, and we'll reciprocate that support with collaboration. The commodities trading industry, which is known for being one of the most competitive in the world, has clearly sent us a message that it wishes to unite to move it forward," Zekioglu said.
A truly market-transformative function would be for the platform to also match counterparties in the way that brokerages do. This does not appear to be on the cards in the short-term, but Zekioglu did not discount it altogether.
"If you can send a Tesla into outer space, then you can do anything. It just depends on the needs of the users and the imperative to preserve a competitive environment for everyone," he said.
The main challenge in setting up VAKT has been the technology itself, "which continues to mature very quickly," he said.
"We've had to keep pace and jump in while everything evolves. This means establishing a true subject-matter collaboration in terms of trading and technology," he said.
"When setting up a company with the involvement of such major firms (oil majors, banks, traders, etc), you'd assume every step would be a challenge. But to the full credit of everyone involved, we haven't experienced any standard bureaucratic issues," he added.
VAKT, which is the Swedish word for guard, has a growing number of employees and is being led by industry veteran Jon Jimenez, who holds the role of interim CEO, after a 20-year career at BP.
More details could surface later this week, when VAKT is expected to issue its second statement.
RIVAL GAS POST-TRADE PLATFORM
Energy majors and trading houses are also involved in a European natural gas post-trade reconciliation blockchain platform being developed by Canada's BTL.
Energy majors Eni, Total and Gazprom Marketing & Trading, utility Vattenfall, and commodity traders Freepoint, Mercuria and Petroineos are among those involved in the OneOffice project, which also seeks to cut back office costs and errors.
BTL completed a 12-week pilot project last June with BP, Eni and Wien Energie to show how its Interbit blockchain platform could automate trade reconciliation processes using smart contracts.
It is now developing the OneOffice application "to deliver cost savings across the trade life cycle," BTL said in January.
BTL's proof of concept made this "an exciting and potentially disruptive prospect in the near future," Gazprom M&T said.