Blockchain to Replace Bill-of-Lading System in Oil Tanker Trade
Blockchain technology might help oil traders streamline the processing of bills of lading, which would reduce the time required for the settlement of contracts.
Several major oil companies, traders, and banks are considering blockchain technology for handling bills of lading, which are documents verifying cargo ownership in commodity trading. This innovation might reduce paperwork, cut costs, and eliminate errors, eventually resulting in higher profits.
Alistair Cross, who runs global operations for commodity trader Mercuria Energy Group, told Bloomberg:
“The way we do our title transfers and post trade execution is very heavy on paperwork. And the paperwork hasn’t really evolved over the last couple of hundred years.”
Mercuria Energy is part of a blockchain-oriented consortium that includes oil traders Gunvor Group and Koch Supply & Trading; oil majors BP, Royal Dutch Shell, and Statoil ASA; and lenders Societe Generale, ING Groep, and ABM Amro.
The companies have already conducted experiments with their blockchain platform for physical commodity trade. During the test, a tanker of oil was sold three times prior to arriving at the final destination. Transactions were verified in 25 minutes rather than the typical three hours.
Souleïma Baddi, managing director at Societe Generale’s Swiss division, said:
“In our business, you have people managing transactions all over the world. [With a blockchain system], people will perform their tasks immediately -- directly on their phone or on their iPad where they do their job.”
Intermediaries working in offices may spend hours on monitoring documents required to settle contracts, which makes the process vulnerable to human errors. Blockchain adoption would reduce such weakness, but it also means certain jobs won’t be needed anymore.
Anthony van Vliet, trade commodity finance chief at ING Groep, said:
“Clearly, these jobs will be affected. If ultimately there are savings, it will mean you could do the same work with less people.”
According to David Shrier, CEO of behavioral analytics firm Distilled Analytics, the first to lose their jobs will be professionals working in logistics, finance, operations, and accounting.