A new blockchain-based energy commodity trading platform

Source: https://www.pexels.com/photo/dirty-industry-stack-factory-2391/

Source: https://www.pexels.com/photo/dirty-industry-stack-factory-2391/

In November 2017, a new venture, named VAKT Global, was created as an independent entity to develop a blockchain-based digital platform for energy commodity trading. Several of the world's largest trading houses, energy companies and banks were behind the creation of this new venture. A year later, a blockchain-based platform built by VAKT Global was launched, promising a more efficient energy commodities trading.

The firm confirmed that the platform is built to accommodate crude oil trading between commodity firms. It claims to be the world’s “first enterprise grade” blockchain solution in the oil and gas market. Based on its press release, five investors within the BFOET market have gone live on the VAKT platform. The BFOET is a five grade of North Sea crude oils – Brent, Forties, Oseberg, Ekofisk, and Troll. These grades determine the Brent crude benchmark for worldwide oil prices.

The platform aims to eliminate paper-based documentation with smart contracts. The newly launched blockchain platform is supported by JPMorgan’s Quorum private distributed ledger and is able to manage physical energy transactions from trade entry to final settlement. It is expected to reduce errors, cut costs, and improve efficiency by eliminating the reconciliation process.

In the meantime, VAKT’s platform is limited to selected companies within the BFOET market. However, the company plans to expand its platform to allow third parties and all physical energy commodity to be traded within its platform. The platform was launched live in December 2018 and has since signed up over 60% of oil dealers in North Sea crude oils.

Anglo-Dutch oil giant Shell and British Petroleum (BP) were among the first users of this new platform. Following, members in the consortium came on board such as Gunvor, Koch Supply & Trading, and Mercuria (trading houses), Statoil (energy companies), and ABN Amro, ING, and Societe Generale (banks). John Jimenez VAKT Interim CEO said that “Launching into our first market with such high-calibre first users is a transformational moment for us and the industry. But it’s just the start. Success for a blockchain solution depends on widespread adoption, and we’re looking forward to seeing the ecosystem grow.”

While VAKT claimed to be the world’s “first enterprise grade”, it has been reported that the energy industry has invested as much as $300 million in blockchain technology. One prominent player is Ondiflo by ConsenSys and Amalto, which was developed to modernise and improve the order-to-cash processes in all sectors of the oil industry that still rely on paper-based transactions.

It is yet unknown how VAKT’s platform will reform the existing energy commodity trading. With a promise to save up to 40% cost savings, VAKT’s product development vice president, Lyon Hardgrave said:

“This not a trading platform, nor a settlement platform – there is no crypto currency involved. But it is everything in between: deal recap; confirmation; contract; logistics (the really big element in all this) — and invoicing.”

Javier Bilbao