Energy majors BP, Shell and Statoil are to co-develop a blockchain-based
digital platform for energy trading.

The investor group, which includes trading houses Gunvor, Koch Supply &
Trading, and Mercuria, plus banks ABN Amro, ING and Societe Generale, aims to
“modernize and transform post-transaction management of physical energy
commodities trading,” the companies said in a joint statement Monday.

The platform is to be managed and operated as an independent entity. It
is expected to be operational by the end of 2018.

The goal is to create a secure, real-time blockchain-based digital
platform to manage physical energy transactions from trade entry to final
settlement.

Pending regulatory clearance, the platform will be open to the whole
commodity industry after it has been tested by the investors.

“The intent is to move away from traditional and cumbersome paper
contracts and operations documentation to secure, smart contracts and
authenticated transfers of electronic documents,” the group said.

The platform should reduce administrative operational risks and costs of
physical energy trading.

It should also improve reliability and efficiency of back-end trading
operations for all supply chain users, “while also opening the door to
innovative funding and financing solutions,” the group said.

Over time, the venture intends to lead the migration of all forms of
energy transaction data to the blockchain, the companies said.

In June, BP and Italy’s Eni completed a pilot program for European gas
trading using blockchain technology developed by Canada’s BTL Group.

In May, over 20 European energy trading firms joined forces to develop
peer-to-peer blockchain-based trading using Hamburg-based IT company Ponton’s
Enerchain framework. In October, E.ON and Enel completed a first power trade
using the system.

Blockchain is a digital ledger initially designed to record transactions
using the Bitcoin crypto-currency.

Transactions on blockchain are done peer-to-peer without a central
marketplace operated by an exchange or a broker.

The individual participant receives an online wallet that can be charged
up with a digital currency. The individual can then transact with other
members registered to the blockchain.

The blockchain’s network of registered computers continually validates
transactions, building blocks of transactions that are then permanently
entered in the ledger.

Nobody can change the ledger, it is immutable. It is shared with all
members at all times. It is not stored in one central place, reducing the risk
of cybercrime.

Since transactions are cleared instantaneously using the chosen digital
currency, there is no settlement risk. Neither is there any paperwork or
middle-man fees beyond set-up and running costs associated with relatively
simple computing.

–Henry Edwardes-Evans, henry.edwardes-evans@spglobal.com

–Edited by Alisdair Bowles, alisdair.bowles@spglobal.com

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