Oil & Gas

24 Feb 2022

Sinochem Completes China’s First Blockchain Warehouse Receipt Pledge for Crude Oil

24 Feb 2022  by   
Sinochem, China’s fourth-largest state-controlled oil company, has carried out the country’s first digital warehouse receipt pledge for crude oil, using 66 Cloud Chain, its blockchain-based supply chain infrastructure.


The transaction saw Qingdao Taihe Jiabai Energy, a subsidiary of Shandong Jingbo Petrochemical, receive Rmb40mn (US$6.3mn) in financing from Shandong Port Finance Holding by pledging digital warehouse receipts representing a cargo of 17,000 tonnes of crude oil. The oil is stored at the Jingbo Logistics warehouse in Binzhou, a city in the Shandong province, which recently installed the 66 Cloud Chain system.

“Jingbo Logistics cooperated with 66 Cloud Chain in 2021 to upgrade the warehousing branch in Binzhou to a digital and credible reservoir area, which allows financial institutions to query pledged goods remotely and in real time,” says a Jingbo Logistics spokesperson, adding that the company is now digitising another of its oil storage warehouses, based in Longkou, a port city in the Shandong province.

Speaking to GTR, Xie Yimei, a Sinochem spokesperson, explains that 66 Cloud Chain uses “digital twin” technology to create a real-time virtual digital counterpart of goods stored in a warehouse – thereby providing comfort to banks that the goods pledged for financing actually exist.

“By digitising sensor signals, the 66 Cloud Chain creates a digital picture that mirrors the liquid level, pressure and temperature of a specific storage tank in real time as well as the opening and closing status and time record of tank valves. It can even reflect the environmental state around the storage tank and the reservoir area in real time, and the name of the ship that shipped the specific storage tank,” she says, adding that third-party inspection reports are also stored on the blockchain.

“Unless internal and external collusion is carried out to conceal the liquid level of the storage tanks, it is impossible to open warehouse receipts and pledge chattel on a large scale repeatedly,” she says.

Crude oil is the latest sector targeted by Sinochem as it seeks to solve for one of the biggest issues facing commodity trade finance – that of fraud.

Since the Qingdao scandal in 2014, which saw Chinese firm Dezheng Resources raise Rmb12.3bn (US$1.78bn) in funds using fake warehouse receipts for aluminium ingots, alumina and refined copper, numerous industry players have sought to find ways to bring back confidence into the sector.

In 2020, Sinochem launched a blockchain warehouse receipt platform for small and medium enterprises in the Chinese petrochemical sector. Now, with a digital crude oil warehouse receipt transaction under its belt, the company says it will expand its work to create a “warehouse receipt alliance”, covering a greater number of industrial sectors.


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