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Vakt, a blockchain platform for commodity post-trade management, is now live with five of the world’s largest energy companies.

The platform has been privately launched with BP, Equinor, Shell, Gunvor and Mercuria as users, for BFOET (Brent, Forties, Oseberg, Ekofisk and Troll) crude oil trade only. It is set to open to the wider market in January.

By the end of the year the platform will be linked to the recently announced komgo platform for commodity trade finance, allowing banks to offer blockchain-based financing solutions to Vakt users.

Vakt is an independent company created by some of the world’s largest energy companies, commodity traders and banks, including the aforementioned firms, as well as Koch Supply & Trading, ABN Amro, ING and Société Générale.

Underpinned by blockchain, the new platform manages physical energy transactions, from trade entry to final settlement, eliminating reconciliation and paper-based processes. According to a statement by Vakt, the launch marks “the world’s first fully operational, enterprise-grade blockchain platform to enter the market”.

The aim is primarily to improve security and efficiency for all participants in a commodity trade, explains Adam Vile, CTO at Vakt.

“The first market we are going live in is the BFOET market, and most of that happens through a combination of fax, emails and direct telephone conversations. So the real value of the Vakt platform is that it digitises the process,” he tells GTR. He adds that it will also help users in dealing with disputes, because the agreed trade is written onto a tamper-proof distributed ledger.

Users will also be able to easily access trade finance through the platform. This will happen by linking Vakt to komgo, a blockchain-based commodity trade finance solution that digitises trade and commodity finance products.

“We work very closely with komgo,” Vile says. “They will be directly connected to us, we hope, before the end of the year, so that users of Vakt can request trade finance via Vakt. The request then goes straight onto komgo, and users can get various quotes, select one and then attach that to their cargo on Vakt.”

As such, banks won’t be using the Vakt platform directly, but offer financing solutions via komgo.

Expected to go live before the end of the year, komgo will initially facilitate two commodity trade finance processes/products: know your customers (KYC) and the letter of credit.

The KYC solution will allow for the secure exchange of documents on an encrypted basis, and without using a central database, meaning that users keep their documents within their own premises. The digital letters of credit, meanwhile, will enable commodity houses or other players to submit digital trade data and documents to banks on komgo.

Banks involved in the komgo project include ABN Amro, BNP Paribas, Citi, Crédit Agricole, ING, MUFG Bank, Natixis, Rabobank and Société Générale.

With many of the same shareholders, Vakt and komgo have been closely aligned from day one, but being divided into separate platforms allows them a core focus on post-trade processes and trade finance respectively. The two platforms can easily connect because they are built on the same blockchain framework, Quorum, the enterprise-focused version of Ethereum.

Vakt’s aim is to extend the platform to all physically traded energy commodities. The company says it is building its roadmap “in response to industry need” but has US crude oil pipelines and Northern Europe refined product barges slated for launch in early 2019.

Meanwhile, the private launch of Vakt was welcomed today by its first users, with Eren Zekioglu, chief operations and IT officer at Gunvor, saying: “To be great a trading company needs two things: good technology and speed. By radically streamlining post-trade processes, Vakt offers both. This is a big step for the physical energy trading markets and I see Vakt becoming the industry standard.”

Andrew Smith, executive vice-president for trading and supply at Shell Trading and Shipping Company, adds: “Collaboration with our peers and some of the industry’s key players is the best way to combine market expertise and achieve the scale necessary to launch a digital transaction platform that could transform the way we all do business. Ultimately the aim is improved speed and security, which benefits everyone along the supply chain from market participants to customers.”