Key Legal and Financial Steps to Initiate a Petroleum Trade

Key Legal and Financial Steps to Initiate a Petroleum Trade

1. Seller Issues Soft Corporate Offer (SCO)

• Proof of Product (POP) or title of ownership

• Full product specifications (e.g., EN590, D2, LPG, etc.)

• Quantity, packaging, delivery destination

• Pricing method and payment terms

• Delivery terms (e.g., FOB, CIF, TTO, DDP)

• Seller’s corporate documents (Registration, Tax ID, parent company details, authorized representatives)

• Product quality certificates if applicable

2. Buyer Submits Irrevocable Corporate Purchase Order (ICPO)

• Acknowledgement and acceptance of seller’s terms and product

• Full buyer company profile (registration, tax documents, official address)

• Power of attorney or official mandate letter from buyer’s authorized signatory

• Proof of Funds (POF) or Bank Comfort Letter (BCL)

• Buyer’s banking details for contract issuance

3. Optional: Bank Readiness Letter (RWA or BCL)

• Issued by the buyer’s bank confirming readiness to issue financial instruments (LC or SBLC)

4. Seller Issues Draft Contract (SPA - Sales and Purchase Agreement)

• Comprehensive terms of trade, including delivery, payment, warranties, and dispute resolution

• Signed and countersigned by both parties

5. Buyer Issues Financial Instrument

• Common methods:

• LC (Letter of Credit)

• SBLC (Standby Letter of Credit)

• Escrow account (optional in some cases)

• Seller verifies and accepts the financial instrument

6. Seller Initiates Delivery Operations

• Product preparation, logistics, loading, shipping

• Shipping and customs documentation:

• Bill of Lading (B/L)

• Packing List

• Certificate of Origin

• MSDS

• SGS Inspection Report (if applicable)

• Buyer is informed to prepare for receipt

7. Buyer Confirms Receipt and Releases Payment

• Physical and documentary confirmation of delivery

• Payment release as per contract terms

• Product unloading, transfer of ownership, and conclusion of transaction

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Key Legal Recommendations

• Always engage a legal and financial advisor during contract negotiation.

• Use international jurisdictions for dispute resolution (e.g., UK, Singapore, Switzerland, UAE).

• Involve third-party inspection agencies like SGS or Bureau Veritas when possible.

• Ensure all steps and communications are documented and verifiable.

✅ Oil & Gas Trade Checklist

🟥 For Seller 

Step	Action	Document
1	Prepare official product offer	SCO (Soft Corporate Offer)
2	Prove ownership and product availability	POP (Proof of Product)
3	Share company credentials	Company registration, Tax ID, Mandate
4	Define clear delivery terms	Incoterms (e.g., CIF, FOB, DDP)
5	Await ICPO from buyer
6	Draft & send Sales-Purchase Agreement	SPA (Contract)
7	Verify financial instrument (LC/SBLC)	From buyer’s bank
8	Initiate logistics & shipment	B/L, Packing List, SGS, MSDS
9	Submit documents to buyer/bank	For payment clearance
10	Confirm payment release

🟩 For Buyer 

Step	Action	Document
1	Review seller’s SCO and documents
2	Confirm interest and intent to purchase	ICPO (Irrevocable Corporate Purchase Order)
3	Share company profile & bank details	Company reg, Mandate, Bank info
4	Show proof of funds	POF or BCL
5	Sign the SPA received from seller
6	Issue financial instrument	LC / SBLC / Escrow
7	Track shipment and coordinate delivery
8	Verify shipment documents	B/L, SGS, Origin Certificate
9	Confirm product arrival & quality
10	Authorize payment release