Etienne Amic took the helm at VAKT, the commodities trading blockchain business, in February, after a career spanning an oil major, a bank and a commodity trading house. Here, Damian Stewart, Managing Partner, EMEA & Asia, at Human Capital, sat down with him to discuss his vision for a commodities revolution
Walking into the jeans-and-trainers, open-plan offices of VAKT, on the 24th floor of Canary Wharf’s iconic One Canada Square tower, you immediately feel like you are mixing with the tech whizzkids changing the financial services industry from the inside out. VAKT comes with the blue-blood backing of a consortium of the world’s largest traders – including BP, Shell, Equinor, Gunvor, Total, and Mercuria – but its vision to reshape commodities trading through blockchain is being powered by computer scientists, technologists and data experts far removed from the traditions of Big Oil.
French-born Etienne studied quantum physics before taking to commodities trading, and brings experience as a managing director at both JPMorgan Chase and Mercuria Energy Trading to the VAKT platform. His two most recent roles saw him co-founding and chairing Vortexa, a cargo analytics firm specialising in the crude oil and refined products markets, and launching CommodiTech Ventures, a funder of innovative commodities technologies and business models. It is fair to say Etienne has been predicting the technological transformation of the physical commodities market for a while, but now he is walking the talk.
VAKT has quickly established itself as one of the leading blockchain consortiums in the oil trading space, having officially launched for both consortium and non-consortium licensees in the North Sea BFOET crude oil market at the end of February. The platform is already handling around 80% of the physical parcels being sold in that market, working with nearly two-thirds of the traders, and the VAKT shareholders who participate in the market are now reporting that all their BFOET trades are being entered onto the VAKT platform.
But, Etienne says: “We are still missing some critical players and we are working on getting them on board. This is a collaborative platform, so each client derives the most value if other clients use it. I won’t be satisfied until we get closer to 100% market share, because that’s when we will really provide the most value to everybody.”
Some commentators have drawn comparisons between VAKT and the launch in 2000 of Intercontinental Exchange (ICE), which brought a more transparent, efficient, internet-based platform to the OTC energy trading markets and was also consortium-led.
“ICE was really about flawless execution,” Etienne says. “They also really comprehensively seized the opportunities in front of them. For us, one of the lessons starting as a consortium is around that delicate balance where you can maybe risk becoming a utility if you’re not careful. You really need to go for the market opportunity.”
Which begs the question of just where VAKT will go next. VAKT’s longer term ambition is to cover all physically-traded energy markets, with the immediate roadmap focused on northwest European refined product barges.
There are currently no plans to deviate from the post-trade elements of the deal lifecycle, handling everything from the confirmation of the trade through to invoicing, and smoothing access to trade finance. Etienne says: “There is so much to do in that space. Physical oil trading is very decentralised so to crystallise the value of trade, you may need the contributions of the brokers, inspection companies, terminal or pipeline operators, ship owners and port agents.”
He adds: “You have to have a digital infrastructure that allows all of those constituents to contribute their data. By protecting the confidentiality of bilateral contracts through encryption and allowing auditability through ledger technologies, blockchain is a very strong contender as a communication platform to make physical trading more seamless post-execution. Our goal is to keep bilateral contracts: we don’t want to intermediate between a trader and an inspection company, or between two traders – that’s their business. What we’d rather do very well is create a digital backbone that allows these existing contracts to be effected very efficiently.”
He is used to all-comers sharing their opinions on whether the business should move into execution or pricing, but insists there is significant value to be created in what VAKT is currently doing, so that remains the focus for now. “Just digitising existing operations fully will lower the unit cost of physical transactions – probably increasing the size of markets in the process – and will unlock optimisation and service opportunities that are not visible today,” says Etienne.
The energy and commodities markets have long lagged behind others in terms of digitisation and innovation, with a recent report by Boston Consulting Group looking at digital adoption across eight industries ranking energy commodities last, and the media first. There are many reasons for that, with Etienne pointing to structural complexities, a lack of digital expertise, and the culture of the industry, which was after all built on secrecy and the competitive exploitation of market inefficiencies.
Where he now predicts real disruption is in physical commodities trading, where the amount and types of data available to traders have exploded in recent years, thanks to the internet of things, satellite technology and remote sensing. “5G will be a game-changer in that,” says Etienne. “The physical commodities industry is now generating a lot more data in real-time and we see software going deep into the operations of the physical assets and generating a lot of data that can be rapidly processed and used for optimisation and trading.”
He adds, “Within five years, visibility of physical trading patterns will have increased further and machine intelligence will probably augment a lot of the post-trade tasks. We are just a small part of this overall trend by contributing to the collaborative nature of the new world.”
VAKT came about organically, because oil traders immediately saw the opportunity that blockchain offered to provide a single source of truth for buyers and sellers and to modernise the trading industry whilst protecting clients’ data. “That’s an idea that captured the collective imagination of our shareholders,” Etienne tells me. “Obviously it’s very useful to have a consortium when you want to reach critical mass to incentivise adoption; but it’s not sufficient. You need a product and a technology that allows the world to see that even though you were started by major players, they don’t have a built-in advantage. Blockchain does precisely that.”
The fact that VAKT is solving a recognised business need and is backed by industry stalwarts has proved crucial to attracting top-class tech talent, with the recruitment of Etienne just the latest step by its consortium owners to take the business to the next level. His ability to combine experience both as a trader and in bringing technology to market made him the ideal fit for a commodities blockchain venture, but it is still a challenge to attract top-rate tech talent when competing against the likes of Google and Amazon.
To grow faster, VAKT has established a development centre in Portugal that will house 60 staff; even there, the competition from the wider technology world is fierce.
To attract that talent, “we have to articulate a mission and adapt it as the business grows,” says Etienne. “But we are at the cutting edge of the technologies we deploy and VAKT is one of the very few enterprise-grade blockchain platforms currently operational, across all industries. That has proved to be a very powerful draw.”
Etienne has enjoyed tracking the cutting edge of the industry: “When I started, technology was really the IT department, who you called only when the computers or the servers didn’t work. Now, technology is core to the business and a lot of the industry is not prepared for that. Traders need to think of technology as the future and integral to their day-to-day activities. It’s not going to be a slow evolution and people are starting to feel threatened.”
Generational change is taking place across the commodities industry, and technological advances are coming along in a way and at a pace that not all individuals, or companies, are ready to embrace. Etienne was an early investor in commoditech and is clearly quietly buzzing in his new role.
“If you can transform the industry and work with its largest players, without wearing a tie or shining your shoes, it’s very satisfying,” he says.
In Conversation with…
The ICW series looks at key trends in the energy and commodities markets with senior industry leaders. Whether discussing diversity in the workforce or the impact of new technologies, the aim is to shine a light on some unique market perspectives, showcasing both the personalities at the pinnacle of the market and their views on the issues of the day.