Dutch bank ING and France’s Société Générale are in talks with global commodities traders to test trading of liquefied natural gas (LNG) on a blockchain enabled with smart contracts.
The two banks are said to be seeking to enhance the trading process of LNG, following the successful trialling of crude oil cargo trade on a blockchain last month.
According to Reuters, the two banks have already spoken to several players in the LNG trading market about testing a deal on a blockchain ‘within months’. LNG is natural gas converted to its liquid form for easier storage and transport.
“LNG is an area we definitely want to focus on because it’s a growing market but at the same time, it’s controlled by a few very important players,” ING’s director of trade and commodity finance, Patrick Arnaud, told Reuters.
The news service added that Arnaud is already talking to several companies active in the LNG market about testing a blockchain-based deal within months, although he declined to name the companies.
The banks’ move to sell their smart contracts-enabled solution for global trade comes soon after the first ever large oil trade transaction powered by blockchain technology was executed. Announced in January it involved an oil cargo shipment containing African crude, sold to Chinese petrochemical giant ChemChina.
The blockchain-powered trade took shape after Mercuria, the Switzerland-based major commodity trader, expressed interest in the decentralised innovation. Its chief executive officer (CEO), Marco Dunand, said last year blockchain payments could slash payment costs in a system stuck in the “17th or 18th century” by around 30%.
ING and SG subsequently offered their blockchain platform to Mercuria for the African crude transaction. The banks said that in addition to cost savings, the commodity trader was able to reduce some processes from three hours to 25 minutes, supporting the case for expansion into LNG, natural gas converted to liquid form for easier storage or transport.
Several of the world’s major energy groups are now reviewing smart contracts-enabled blockchain technology as a viable solution for utility trades. Austria’s largest energy company, Wien Energie, has announced a blockchain pilot for decentralised energy trading, which gets underway this month and will run to May.
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