Oil Kingpins Shell And BP to Back Blockchain Initiative for ‘Physical Energy Transaction Management’
Shell and BP, two oil industry giants, have went together with some other oil companies to modernize the industry, and the companies intend to do it by automating post-trade processes in the industry.
The platform is being built by a consortium led by VAKT Global, which has recently revealed the initiative.
This effort, according to the official announcement, was made to replace paper-based documentation, which is notoriously more expensive and hard to use, with the blockchain technology and the use of smart contracts. This, they believe, will cut costs and reduce the risk of human error in the post-trade processes.
The group has affirmed that this will lead to a service that can be more efficient and structured to trade better. The consortium expects to get the project live by the the end of November focusing on the North Sea oil market. In 2019, they already plan to look at ARA barges, waterborne markes and US crude pipelines, the vice president of product development at VAKT Global, Lyon Hardgrave, has affirmed.
It looks like the first licensees are expected to be starting on the project by January and the company has affirmed that the blockchain technology will be run by the consortium members and that will be run by an independent entity. However, regulatory approvals are still pending at the time.
The consortium will be formed by many companies. Besides from Shell and BP, which are the two most well-known names, the group will include Statoil, a Norwegian energy company, and others like Gunvor, Koch Supply & Trading and Mercuria. The banks in the initiative include ABN Amro, ING and Societe Generale.
Estimates show that the companies who decide to join the consortium are to expect a decrease of around 40% in the price of their post-trade resolution processes.
Hardgrave has affirmed that this is “not a trading platform” and that there is “no cryptocurrency involved”, which will certainly please certain investors.