Energy giant: Crude oil trading market may adopt blockchain payment system within a year

The traditional oil and gas industry is expected to begin adopting the technology underlying the digital currency bitcoin next year, according to one of the world's largest futures traders.

The futures world is a place where processes are often basic but involve a lot of paperwork. Even the process of loading oil onto a tanker involves paperwork. And for today’s technological environment, paper-based office work is outdated.

Marco Dunand, CEO of Swiss energy giant Mercuria, said:

Is this the 17th or 18th century? These (workflows) are not complicated at all, and with today's technology, it is absolutely easy to improve the efficiency of the system.

Many banks believe that the technology solutions are here and they are reliable. I think the oil and gas industry will also undergo a digital transformation.

Brent oil is a benchmark for oil prices in the global market. Dunand believes that the Brent crude oil market should seek the opinions of multiple participants and adopt a payment method based on blockchain technology.

The Brent market is made up of four major crude oil producing areas (BFOEs) – Brent, Forties, Ekofisk and Oseberg – which Dunand believes could be early adopters of blockchain technology in the industry.

The BFOE market has limited participants and requires a reasonably stable balance sheet. This type of market can definitely successfully transition to a blockchain payment system within 1 year.

We believe (the blockchain system) can reduce costs by 30%, especially payment costs.

Blockchain technology can create a persistent, public ledger for transactions. A simple ledger can replace the current complex clearing and settlement system.

Dunand's company primarily builds connections between the physical market (oil trading) and the paper market (futures, options and other derivatives trading).

Compared with financial markets, futures markets are smaller and are generally not as receptive to new technologies as the financial industry.

Today, almost every major bank says it is researching blockchain technology, and the specific financial use cases proposed are even scheduled for 10 years into the future.

In February this year, Oliver Wyman released a report stating that it would take at least ten years for blockchain technology to disrupt the core of the financial industry.

Dunand said the energy market is still waiting for the right moment.

We are very adaptable to new technologies (blockchain), but to promote the development of new technologies in the energy market, we still need the affirmation and active participation of certain industry participants... They are the only factor that has delayed the development of blockchain reforms in the energy market.

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