China Merchants and Cosco Shipping push for blockchain use in oil trade
Two state-owned tanker giants and their partners published a whitepaper, which pushes the prospects for a fully digitalised and integrated supply chain in the energy and petroleum sector empowered by blockchain applications
A GROUP of Chinese oil trade players, including two major tanker owners, have published a whitepaper on the use of blockchain applications to increase efficiency and security in the sector.
The initiative, unveiled last Friday, has envisaged a digital platform that incorporates all the key stake holders in the supply chain of the energy and petroleum industry - including oil companies, trading houses, pipeline operators, ports, shipping firms, financial institutions and regulators - to streamlines the processes.
China Merchants Energy Shipping and Cosco Shipping Energy Transportation, two of the world’s biggest owners of very large crude carriers, are among the co-authors. Others are Sinochem Energy Hi-Tech, PetroChina International, Bank of China, China Construction Bank and Macquarie and Wanxiang Blockchain Labs.
The paper said that tanker shipping firms are in the middle of the industry's supply chain and are required to provide more secure and transparent services. But at the same time, they have large funding needs, which can be difficult to meet by traditional tools such as corporate guarantees, vessel collateral and project financing.
“Shipping companies want to use blockchain technologies to share shipping bills, make data safe and transparent, and renovate financing methods,” the white paper said.
One practical example of this is enabling demurrage charges and other fees under Contracts of Affreightment to be automatically authenticated and paid for with smart contract technologies.
At the same time, the paper added that this digitalised and secure information can be used for collateral loans backed by demurrage charges, sale of overdue accounts or even structural financing to “improve the efficiency of shipping companies’ use of funds”.
In addition to greater flexibility in financing arrangements, digitalised documents can also offer “a perfect solution” for tanker owners who at present cannot obtain the original bills of lading from cargo owners and have to rely on charterers’ letters of guarantee when discharging.
“Blockchain is the most disruptive innovation after the internet,” CMES chairman Xie Chunlin was quoted by the whitepaper as saying, adding his company was willing to work with its partners to further explore the cutting edge technology.
His counterpart at CSET Liu Hanbo said that the whitepaper “has portrayed the common ideal” shared by those in the energy and petroleum industry, and that its ambitions will be realised with the joint efforts of the company and its allies.