If you can put something on a blockchain, do it by all means. That’s the mantra these days, and today we are exploring the “connection” between oil and decentralized computing.
We’ll start with S&P Global Platts, which has developed a blockchain-based platform for sharing oil inventories in the United Arab Emirates (UAE), and has launched it as one of the first real-world products utilizing blockchain in the oil industry.
The platform allows market participants to submit data on oil storage on a weekly basis to the UAE’s Fujairah Oil Industry Zone (FOIZ), as well as the overseeing body FEDCom. It enables FOIZ terminal operators to deliver their inventory data in a “more efficient and secure environment,” according to Mamdouh Malek Azizeh, commercial director of Fujairah Oil Terminal FZC. In comparison, the current process is “manual and unstructured,” and obviously takes more time for validation and collation of the data.
“As part of our ongoing commitment to digital transformation in the energy sector and delivering innovative solutions, we are excited about the opportunity to engage with market participants to discuss ways of deploying this technology more broadly to help improve efficiency and manage risk in a secure environment,” James Rilett, Platt’s senior director of innovation and digital strategy, said in a statement.
IBM is also looking to use blockchain for oil trade…
The Big Blue is working with a group of companies, including the commodities trading group Trafigura and corporate investment bank Natixis, on a blockchain-based crude oil trade finance platform.
Built using code from the Linux Foundation-led Hyperledger project and hosted on IBM’s BlueMix cloud hosting service, the platform enables parties to view transaction data as it is published on the blockchain. It also hosts documentation and updates on shipments, deliveries and payments.
According to Arnaud Stevens, Natixis’ head of global energy and commodities in New York, blockchain has the potential to bring down costs while also boosting procedural transparency.
“We want to use blockchain to optimize the antiquated arena of commodity trade finance,” he said. “The current process is paper and labor intensive, we have multiple friction points with high processing costs and limited automation. Distributed ledger technology brings some much-needed innovation into our industry.”
And so does ING
Dutch bank ING is well versed in blockchain, having worked on more than 20 decentralized solutions to better understand technology.
Among those solutions are platforms for trading natural gas and oil, the latter of which is built on Ethereum and has already conducted live transactions. And it’s apparently working as ING has decided to open the platform to other banks.
“It’s easier if you only work with a small number of people to make decisions on tests and iterate and test your hypotheses and test your metrics,” Ivar Wiersma, ING’s head of wholesale banking innovation, told CoinDesk. “Only in the next stage will we be looking to expand that network.”
ING’s oil-trading platform runs on what it refers to as the Easy Trading Connect blockchain prototype; it has conducted transactions between ING, Société Générale and commodities trading house Mercuria, involving an oil cargo shipment of African crude oil that was sold three times on its way to China.
These transactions ran in a private version of the Ethereum blockchain, with ING’s software verifying that pertinent documents comply with the smart contract that defined the terms of the transaction. Such setup has reportedly increased efficiencies up to 33 percent, while delivering cost savings of around 30 percent.
With such impressive figures, ING is now thinking how to monetize on its offering, since it obviously delivers results.
“We don’t know what the winners will be, we don’t know what the applications will be or who will be the winning parties. But there’s a lot more [value] in addition to cost and capital savings,” Wiersma added.