LONDON (ICIS)–The London-based consortium VAKT aims to introduce its blockchain-powered commodities post-trade processing platform in the northwest Europe petrochemicals markets by the end of this year, according to its chief commercial officer (CCO).
Stephanie Trabia said in a written response to ICIS the service will be initially offered to players in the petrochemicals hub of Amsterdam-Rotterdam-Antwerp (ARA).
VAKT aims to expand its current platform, currently in use for crude oil trades in the North Sea, to petrochemicals, although Trabia would not disclose an exact date for the launch in the ARA region.
Apart from petrochemicals, VAKT also plans to cover US crude oil pipelines as well as northwest Europe refined product barges as the company aims to gain market share in all physically traded energy markets.
The company hopes to gain traction by allowing trading parties and ecosystem participants to communicate and exchange sensitive information in a secure, efficient, and digital way.
Blockchain technology allows the participants to keep ownership and control of their data while benefiting from the immutability and the time stamped record of all the actions run through the blockchain.
Over the past years, other attempts to use blockchain in the petrochemicals industry did not gain enough traction to change well-established trading methods.
However, Trabia said implementation within the petrochemicals industry is gaining momentum, reason why VAKT decided to expand into the sector this year.
VAKT counts among its founding members energy majors like BP, Shell, and Equinor; investors in the enterprise include Saudi Aramco, Total, Reliance, Mercuria, and ABN AMRO.
Trabia said the oil and gas sector is already embracing distributed ledger technologies (DLT) such as blockchain and she was adamant to differentiate cryptocurrency from DTL.
“Cryptocurrency is a speculative asset – that is not our business. But if you consider [DLT] from the perspective of tokenisation, where a token may represent ownership of a cargo that will be changing hands in a similar fashion to the passing of cryptocurrency from one wallet to another, DLT technology and the existence of VAKT prove that interest exists in this sector,” she said.
Despite the increasing interest from the oil and gas sector, implementation and scale-up of industry specific blockchain based post-trade platforms worldwide remain relatively slow.
According to Trabia, the main obstacles would be the change of business process across a wide variety of participants, as well as the lack of knowledge and technical understanding.
“The oil sector remains a more complex one than others due to the transportation constraints of the good. Standardisation of processes and legal frameworks remain challenging, but not impossible,” she added.
Blockchain can also play a pivotal role in ensuring sustainability credentials of bio-feedstocks through increased transparency and reducing fraud amid the ongoing energy transition, she added.
“The immutability of the data and the track record of every action on the blockchain can be used to validate the source of the data and authenticate the quality of the feedstock origins. It requires the originator to be on the blockchain and to push accurate data,” she said.
“Every VAKT participant signs a licence agreement with us, making them liable for any data they push to the blockchain.”
Supporting the traceability of bio-feedstocks to provide comprehensive breakdown of the product evolution of the fuel along the supply chain is still a grey area for the global biofuels industry.
In theory, DLT technology platforms such as VAKT’s could potentially be implemented to remedy feedstock origin concerns for products that rely on bio-feedstocks.
Regulation around the technology stands to play a crucial role in widespread implementation, but it is yet to be clearly established.
According to Trabia, the biggest complexity lies in the recognition of digital documents, especially ownership titles, by ports and customs authorities across Europe, as well other bodies such as marine police forces.
“It is not about the technology used but more about the legal framework not yet being aligned with the new technology environment. The Singapore Marine Port Authority is playing a leading role in this change,” she said.
There have recently been some wider concerns about the vast energy consumption of certain cryptocurrencies which may be an issue in the age of sustainability and energy transition.
Trabia conceded that energy consumption “remains a very sensitive topic” but added that private blockchains like those developed by VAKT would not have the same high consumption levels as public ones, where active mining occurs.
“Nevertheless, our new technology relies more and more on electricity, and this remains a debate which is wider than the cryptocurrencies world,” she said.
She concluded arguing that the technology developed by the consortium would at least gain green credentials from less use of paper documents, for example.
Front page picture source: Mark Lennihan/AP/Shutterstock
Interview article by Nazif Nazmul