An elite group of distinguished companies who market and trade natural gas in North America join in a new endeavor to form the new, independent company, Eleox.
This group includes bp, Castleton Commodities International LLC, Koch Energy, Macquarie Group, Mercuria Energy America, and Shell Energy North America (U.S.), L.P.
Eleox will create and manage an enterprise-grade application based on Distributed Ledger Technology. The technology offers a complete lifecycle platform designed to improve commodity post-trade processing.
Eleox’s new development is the first of its kind enterprise-grade application on a mission to solve operational inefficiencies in natural gas trading inherently found in legacy systems.
By replacing aging repositories of post-trade systems with Eleox’s secure and enhanced settlement processing platform, transactions are consolidated into one application and managed from post-trade through settlement. With this new protected real-time digital method, paper-based contracts and manual reconciliation processes will soon become obsolete.
As part of the initial phase, the platform will enhance the post-trade process for North American physical natural gas. However, Eleox plans to provide solutions in the future for adjacent markets as well.
“We are excited by Eleox’s roadmap, which offers countless opportunities to improve post-trade processing,” said Eleox CEO Kirk Coburn. “Advances in technology mean we can digitize energy trading in the same way we have seen so many other sectors transform, and our platform will help customers optimize the post-trade process, today and tomorrow.”
According to the company, their new and improved settlement processing platform will achieve “increased transparency and accountability while maintaining data security using distributed ledger technology,” sometimes referred to as a blockchain. It will also serve as a “single source of truth throughout the trade life cycle.” Benefits will include “fewer data errors, fewer mismatches, and less manual reconciliation, minimizing delays in transaction settlements.”
Eleox will design the platform, and the founding members will test it. “This will constitute a key segment of its projected user base.” Eleox expects to make its offering available to all market participants by late 2022.
Natural gas is a popular commodity to trade, with high liquidity making it possible for traders to move in and out of trades, whether they are trading the commodity itself or natural gas exchange-traded funds. Similar strategies exist among the broader range of commodities, including gold and crude oil.
Storage, supply and demand, weather trends, and weather events are among the market dynamics traders analyze. While electronic trading platforms have automated many of the processes on the front-end of the trading experience, back-office data processing has been slower to evolve until now.
According to IBIS World, in 2021, the U.S. market size of the natural gas distribution industry, measured by revenue, is $163.2 billion and, on average, has grown 3.9 percent per year between 2016 and 2021. The U.S. market size of the natural gas distribution industry increased faster than the utilities sector overall. It is ranked 2nd in the utilities industry by market size and is the 76th largest in the U.S.
Natural gas plays a significant role in the energy industry, with innovation in natural gas usage, which was once considered a simple byproduct of oil production. Natural gas is now used in residential and industrial settings and leverages electricity generation.
According to the U.S. Energy Information Administration, as published in U.S. Energy Facts Explained: The United States Uses a Mix of Energy Sources, approximately 23 million natural gas vehicles are worldwide.
According to the American Gas Association, an industry organization representing more than 200 local energy companies that deliver clean natural gas throughout the U.S., natural gas meets more than one-fourth of the energy needs of the United States. The association says natural gas is the cleanest burning fossil fuel and economically friendly, contributing to about 32 percent of the United States’ energy usage in 2019, a popular alternative to other fossil fuels.
Natural gas “is an important tool in the suite of greenhouse gas emissions reduction options available to the United States,” the association explains on their website. “Natural gas will continue to benefit our nation as states move to further reduce carbon dioxide emissions created in electric power generation. Greater direct use of natural gas for heating and cooling, water heating, cooking, and clothes drying can cut carbon emissions nearly in half. That is because natural gas appliances and the network that delivers the energy to your home is extraordinarily efficient.”
Eleox is now on a mission to make natural gas trading equally as efficient while also establishing a foundation that can become a valuable tool in measuring carbon emissions and managing carbon credits. Coburn says, “While we are focused on natural gas today, we have ambitions to expand into power and to build a platform to track carbon emissions data across a range of commodities, from the source to the end-user.” Coburn further states, “Our vision is to support broader energy markets and the transition to a lower-carbon future. The support of these industry leaders demonstrates both the scale of the challenges facing energy trading companies today, and the resolve from market participants to address them with technology to create a more efficient and secure energy sector.”
See Eleox press release here.