Chevron, Total and Reliance Industries are backing a new digital platform for crude oil trading based on blockchain and launched late last year, joining a consortium of investors that includes BP, Royal Dutch Shell and Equinor as well as traders Gunvor, Mercuria and Koch Supply & Trading.

Vakt is the first blockchain trading platform for physical oil trades. Trading of physical commodities has historically been a cumbersome and lengthy process, executed through mountains of documents, including letters of credit, invoices and inspection certificates sent around the world by email, fax or post.

By putting the paperwork on a secure, real-time blockchain-based digital platform, Vakt aims to offer faster, cheaper and more secure ways of completing a commodities trade.

“Chevron is joining the Vakt consortium to stay at the forefront of the technology’s development and to help move the industry forward in the blockchain space,” said Colin Parfitt, president of supply and trading at Chevron.

With the addition of Chevron, Reliance and Total as backers, the blockchain platform would have five of the world’s top 10 largest oil and gas companies by market capitalisation as investors, said Vakt. Other investors include banks ABN Amro, ING and Société Générale.

The platform will initially handle trades in the main North Sea physical crude oil contract and is expected to be extended to all physically traded energy-related commodities.

Energy and agricultural traders have been trialling digital platforms over the past few years. Leading agricultural traders Archer Daniels Midland, Bunge, Cargill and Louis Dreyfus as well as China’s Cofco International are working together to create a blockchain-based digital trading system.

Blockchain is an electronic information system that provides the underpinning of cryptocurrencies by recording deals in digital blocks. Encrypted digital information can be shared and corroborated. The records cannot be revised and any attempted changes are visible to all participants.

The technology will reduce the need to exchange documents, reducing the time and costs needed to complete a trade. In an earlier blockchain trial for a soyabean trade by Louis Dreyfus Commodities, the processing time was cut to a fifth of the traditional model. Traders are also able to monitor the operation’s progress in real time and verify data, while the platform will also reduce the risk of fraud.

Blockchain has also been used to track the provenance of produce in the trade of raw materials. Ford is trialling the technology to trace supplies of cobalt from a Chinese-owned mine in the Congo to the batteries in its electric cars, while De Beers is piloting a diamond tracing scheme. Cargill is operating a traceability programme for its turkeys, and trials for agricultural commodities including cocoa and coffee among various players are also ongoing.

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