The petroleum industry is a global business that operates around the clock. Companies involved in the buying and selling of petroleum products must navigate a complex process that involves multiple stages. This article provides a comprehensive overview of the typical process that companies follow when buying petroleum products.
1. Initial Contact
The first step in the process is the initial contact between the buyer and the seller. This usually involves the buyer submitting an Irrevocable Corporate Purchase Order (ICPO) along with a Notice of Readiness (NOR) from their tank farm or ship. The ICPO is a document that confirms the buyer’s intent to purchase a certain quantity of petroleum products, while the NOR indicates that the buyer’s storage facilities are ready to receive the product.
2. Confirmation of Availability
Once the seller receives the ICPO and NOR, they respond with a Confirmation Letter of fuel availability. This document serves as proof that the seller has the necessary quantity of petroleum products available for sale.
3. Agreement
After the confirmation of availability, the seller issues a Joint Participation Agreement (JPA). The JPA outlines the terms and conditions of the sale, including the price, quantity, and delivery details. Upon receipt of the signed JPA, the seller issues a Commercial Invoice (CI). The CI is a legal document that requests payment from the buyer.
4. Licence Application
If the buyer intends to sell the petroleum products to end users, they must apply for a wholesale licence from the Department of Mineral Resources and Energy. This licence allows the buyer to buy petroleum products in bulk (1,500 litres or more, per transaction of petroleum products) from a licensed manufacturer and sell it to end users.
5. Proof of Product
After the agreement is in place, the seller provides Partial Proof Of Product (PPOP) documents. These documents serve as evidence that the seller possesses the petroleum products that they have agreed to sell.
6. Payment and Transfer
Upon satisfactory Q&Q/Dip Test Inspection carried out by either SGS or a similar inspection agency, the buyer releases the full cost of the liftable product via MT103 TT wire transfer to the seller’s nominated Account within 72 hours and injection to the buyer’s tanks commences.
It’s important to note that these steps can vary depending on the specific circumstances of the transaction, including the countries involved and the specific terms agreed upon by the buyer and seller. It’s always a good idea to consult with a legal expert or trade agency to understand the specifics of buying petroleum products. Also, keep in mind that you may need to obtain certain permits or licenses to import or export petroleum products.
In conclusion, the process of buying petroleum products involves a series of steps that require careful planning and execution. By understanding these steps, companies can navigate the process more effectively and ensure a successful transaction.
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