- Vakt has launched a blockchain based oil trade platform
- It will be linked to komgo, financial commodities trading platform due to launch later this year
For the first time in history, Vakt allows oil giants and trading firms are able to trade crude oil on a live blockchain-based platform, representing a move that is set to revolutionize the market.
Backed by Big Oil and Banks
Extraordinarily small profit margins in this business are the reason why such a platform is needed, because it could reduce operational costs dramatically. Many commodities trading companies have been toying with the idea of using blockchain in the oil trading business – Vakt is the first to launch a ready product. According to shareholder Gunvor Group, it went live on Wednesday – though no trading happened that day.
Because of its secure nature, many expect blockchain to solve inefficient trade and settlement mechanisms of existing solutions, and help in reducing the risk of fraud by improving transparency of all the actions.
Large companies that financed Vakt will be the first, and the only ones to use the platform until the January 2019, when the access will be opened up. Consortium that created Vakt in 2017 consists of oil companies BP and Royal Dutch Shell, Norway-based Equinor along with global energy trading firms Mercuria Energy Group and Koch Supply and Trading. Other consortium members include the aforementioned Gunvor and banks ABN Amro, ING and Societe Generale.
In the beginning, the platform will be limited to contracts for the five North Sea crude grades used to set dated Brent, which is considered a benchmark when it comes to pricing most of the world’s crude oil.
Vakt has plans to include U.S. crude pipelines and barges of refined products like gasoline in northern Europe in the first half of 2019.
Andrew Smith, Shell’s head of trading, explained that the best way to combine market expertise and achieve the scale necessary to launch a digital transaction platform that could totally change the way oil trading business works is by cooperating with industry’s key players. “It’s an exciting time,” he said.
The first, but not the only one
Vakt will be connected to another platform launched in September (although not working yet) – Geneva-based komgo, which will provide financing including digital letters of credit.
Eren Zekioglu, Chief Operations and IT Officer at Gunvor Group, explained, how the two platforms will work together:
“Vakt is the logistical arm…Once a deal is executed through our book of records, it gets pushed through Vakt. The next leg is the financing and the link-up with komgo gives access to several banks.”
komgo, which is expected to go live this year, is backed by a consortium consisting of 10 global banks as well as most of the Vakt shareholders.
komgo will target the full range of commodities trading, from oil to wheat.